Module 4 — Risk & position sizing
Drawdown and recovery maths
5 minute read
In plain English
A 50% loss requires a 100% gain to get back to where you were. Losses compound against you faster than gains compound for you.
Why it matters
This is why capital preservation comes before return-seeking.
Example
£1,000 down to £600 needs a 67% gain to recover, not 40%.
Try this
Use the drawdown calculator in Trading Maths on your worst paper month.
Common mistake
Increasing size to 'win it back'.
What this does not mean
Avoiding drawdown entirely is not possible.
Educational content only. Not financial advice.