Drawdowns are part of trading — even for pros. But how you handle them will decide whether you grow or blow your account.
Let’s simplify the concept.
💡 What Is a Drawdown?
A drawdown is the percentage your account drops from its peak before recovering.
Example:
You grow your account to $1,000 → lose back to $800 = 20% drawdown
📈 Why Drawdowns Hurt More Than You Think
To recover from a 20% loss, you don’t need 20% gain — you need 25% just to break even.
Here's a quick chart:
Drawdown | Gain Needed to Recover |
10% | 11.1% |
20% | 25% |
30% | 43% |
50% | 100% |
The deeper the hole, the harder the climb. That’s why capital protection is key.
🧠 Common Causes of Big Drawdowns
Overleveraging: Trading too big for your account size
Overtrading: Too many positions at once, often emotional
Strategy misfit: Using a trend system in a ranging market
Lack of stop loss: Letting losers run out of control
🛠️ How to Handle a Drawdown
Stop trading temporarily
Step away to reset your emotions and review your trades.Audit your execution
Were you following your rules or trading impulsively?Reduce risk per trade
Dial back position size to protect capital while rebuilding.Journal everything
Track setups, emotions, and what went wrong.Set a recovery plan
Use smaller, high-quality trades to rebuild slowly.
🕰️ How Long Should Recovery Take?
There’s no exact timeline, but rushing usually leads to worse outcomes.
Focus on consistency, not speed.
Sometimes it’s better to:
Trade smaller
Trade less
Wait for better setups
✅ Final Tip
Drawdowns don’t define you — how you respond does.
Respect the cycle, protect your capital, and come back smarter.