A 20% loss followed by a 20% gain does not return an account to its starting value. The percentages apply to different balances. Understanding that change of base helps explain why preventing deep drawdowns matters mathematically, without promising a way to avoid market losses.
Use the remaining balance
Start with ₹1,00,000 and lose 20%, leaving ₹80,000. Recovering the missing ₹20,000 requires a gain of ₹20,000 ÷ ₹80,000 = 25%. The original loss was measured against ₹1,00,000; recovery is measured against ₹80,000.
Recovery gain % = loss % ÷ (100 − loss %) × 100
Compare different drawdowns
| Loss | Remaining from ₹1,00,000 | Required gain |
|---|---|---|
| 10% | ₹90,000 | 11.11% |
| 20% | ₹80,000 | 25% |
| 30% | ₹70,000 | 42.86% |
| 50% | ₹50,000 | 100% |
| 75% | ₹25,000 | 300% |
A 100% loss leaves zero capital. No finite percentage return on zero can restore the original amount without additional capital.
What a recovery-time estimate means
After a 20% drawdown, a hypothetical constant 2% gain per period needs 12 whole compounding periods to reach or exceed the original balance. The formula is log(original balance ÷ remaining balance) ÷ log(1 + return per period), rounded up.
A period is whatever interval your rate describes; 2% monthly and 2% daily are not interchangeable. Enter the drawdown and assumed periodic return into the calculator, then treat the count as a conditional mathematical result. It does not tell you when the market will recover.
Do not confuse deposits with performance
Adding ₹20,000 to an ₹80,000 account restores the cash balance, but it is not a 25% investment gain. Withdrawals and fees also change the amount that must be recovered. Compare like-for-like balances and track external cash flows separately.
Increasing leverage to chase a recovery increases exposure to further loss. Review risk, position size and assumptions instead of treating the required gain as a trading target. Investor.gov’s definition of risk explains why actual outcomes can differ from expectations.
More guides
- How to Calculate Position Size
- Indian Trading Charges Explained
- Trading Compounding with Withdrawals
- Risk Reward Ratio and Break-Even Win Rate
Educational examples only, not personalized investment or tax advice. See our disclaimer and editorial standards. Report a correction.