Wick

Drawdown and the maths of recovery

The Math of an Edge

Losses are harder to undo than to make

This is the asymmetry that ends accounts. Lose 10% and you need 11% to get back. Lose 50% and you need 100% — you must double what's left simply to return to where you started. Lose 80% and you need 400%. Which is why capping the downside matters more than maximising the upside: the trader who never lets a drawdown get deep only ever needs ordinary returns to recover, and the one who does needs a miracle.

Check yourself

After a 50% drawdown, the gain needed to get back to break even is…

  1. 50%
  2. 100% correct
  3. 75%

$100 down to $50, and $50 must double to be $100 again. The deeper the hole, the more brutally this curve bites.

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