A 50 percent fall needs a 100 percent gain to recover

riskPublished 20 October 20261 min readmulti asset

Key points

• From 100 to 80, the fall is 20 percent and the climb back is 25 percent.
• From 100 to 50, the fall is 50 percent and the climb back is 100 percent.
• The drawdown calculator uses a peak and a current value you type.

What is going on

Loss divided by peak is the drawdown. Peak divided by the remaining value, minus one, is the gain required. At a remaining value of 80 the required gain is 25 percent. At 50 it is 100 percent. At 25 it is 300 percent. At zero the division is not defined. The same identity is in the recovery table on the risk hub. Change the peak and the current value and the calculator recomputes it. It does not look up a market.

Why it matters

A plan that says ‘I can tolerate a 50 percent fall’ has also accepted that a doubling is required to get back to the same peak, before costs and before any withdrawal. Time underwater is a separate fact from the depth. Sequence matters when money is being added or removed. A contribution during the fall buys more units. A withdrawal during the fall locks in the smaller base.

What to watch

Say whether the series is a price, a total return, or an account after deposits. The trading journal’s cumulative result is not this percentage unless you have supplied the capital.

Risks

The identity is arithmetic. It is not a forecast that the recovery will arrive. A further fall makes the required gain larger.