How to Use This Drawdown Calculator
This tool uses your strategy stats to simulate account paths and estimate risk:
Step 1: Enter Account Balance
Input your current or planned starting balance.
Step 2: Set Risk Per Trade
Enter the percentage you risk per trade, for example one or two percent.
Step 3: Enter Win Rate and Risk to Reward
Use real data from your trading log where possible, not guesses.
Step 4: Choose Number of Trades
Set the number of trades to simulate, for example 100, 250, or 500.
Step 5: Set Maximum Acceptable Drawdown
For example 20 percent, 30 percent, or whatever you see as your pain point.
The calculator then shows:
- Expected and worst case drawdown ranges
- Chance of hitting your chosen drawdown limit
- Risk of ruin for deeper loss levels
- Likely losing streak length over the chosen trade sample
What Is Drawdown?
Drawdown measures the decline from a peak in your account to a subsequent low, usually expressed as a percentage. Maximum drawdown is the largest peak to trough drop in your equity curve.
Example:
- Start balance: $10,000
- Peak balance: $12,000
- Subsequent low after losses: $8,400
Drawdown from peak:
- Dollar: $12,000 − $8,400 = $3,600
- Percentage: $3,600 ÷ $12,000 = 30 percent
This 30 percent is part of your risk profile. The calculator uses your stats to estimate how often such drops might occur.
Understanding Risk of Ruin
Risk of ruin is the probability that your account hits a specified loss level before you can grow it back. That level could be:
- Account hitting zero
- A large loss such as 50 percent
- A personal stop level such as 30 percent
Even a profitable system can have high risk of ruin if risk per trade is too high, win rate is low, or drawdowns are not controlled.
The calculator estimates:
- Probability of hitting your max drawdown threshold
- Probability of losing a certain fraction of the account
- How risk per trade changes these probabilities
Losing Streaks Are Inevitable
With enough trades, long losing streaks are almost guaranteed, even with a good edge.
Approximate expectations:
- At 50 percent win rate, you can expect at least 5 losing trades in a row over 100 trades.
- At 40 percent win rate, 6 to 7 losses in a row are normal over a few hundred trades.
- At 30 percent win rate, streaks of 8 to 10 losses are not rare.
The calculator uses your win rate and number of trades to estimate:
- Most likely longest losing streak
- Reasonable worst case streak
- How those streaks affect your drawdown at your chosen risk per trade
The message is simple: your position sizing must survive the worst streak you are likely to face.
Recovery Math
Large losses are hard to recover because gains and losses are not symmetric.
| Loss |
Required Gain to Break Even |
| 10% |
11.1% |
| 20% |
25.0% |
| 30% |
42.9% |
| 40% |
66.7% |
| 50% |
100.0% |
| 60% |
150.0% |
| 70% |
233.3% |
A 50 percent drawdown needs a 100 percent gain just to get back to even.
The calculator helps you see how your risk settings affect both the chance of deep drawdowns and the time needed to recover from them.
Value at Risk (VaR)
Value at risk estimates how much you might lose over a given period at a chosen confidence level.
Example:
- Account: $10,000
- Daily VaR at 95 percent: $500
This means that on 19 days out of 20, losses are expected to be less than $500. On one day out of 20, losses may exceed this amount.
The calculator can show:
- One day VaR based on your average loss per trade and trading frequency
- Multi day VaR when you trade several times per day or per week
- How increased risk per trade pushes VaR higher
VaR is not a guarantee, it is a guide to probable loss ranges.
Reducing Risk of Ruin
You can lower your risk of ruin without changing your core strategy by adjusting a few levers.
- Lower Position Size
Reducing risk per trade has a strong effect on drawdown depth and ruin probability.
- Improve Expectancy
Even small improvements in average R per trade reduce the chance of deep drawdowns over time.
- Increase Starting Capital
A larger account at the same position size reduces effective risk per trade and increases survivability.
- Set Hard Drawdown Limits
For example, pause trading or cut size in half after a 10 or 15 percent drawdown.
- Avoid Correlated Bets
Opening several trades that all depend on the same theme increases drawdown risk when that theme fails.
The calculator lets you test how different combinations of these choices change your risk profile.
Using This Calculator with Other Tools
For a full risk picture you can use:
- Position Size Calculator to keep risk per trade within safe limits
- Compound Growth Calculator to see expected growth with your risk settings
- Profit/Loss Calculator to plan individual trades and confirm your R values
The drawdown calculator ties these together by showing what can happen during bad periods, not just in the average case.
Related Trading Calculators
Drawdown quantifies how much damage a losing sequence can do. Use these tools (or explore all trading calculators) to ensure your position sizing, margin buffer, and cost structure can withstand it.
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