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Glossary

Drawdown recovery

Part of the theme Risk and position sizing.

Definition

Drawdown recovery is the gain needed to return to a prior equity peak, and it is always larger than the loss because you recover from a smaller base.

A 10 percent loss needs about 11.1 percent to recover, a 50 percent loss needs 100 percent, and a 75 percent loss needs 300 percent. This asymmetry is why keeping losses small matters so much.

Formula / example: Recovery = 1 / (1 - drawdown) - 1

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