Drawdown math: why protecting capital comes first
After this lesson you can calculate the gain needed to recover any drawdown, estimate the losing streaks your method will face, and write rules that cut risk before a drawdown becomes a disaster.
Drawdown ka hisaab: capital ki hifazat pehle
Drawdown account ki sab se oonchi satah se neeche girne ka naam hai. Nuqsan wapas lane ke liye hamesha zyada munafa chahiye: -10% ke liye +11.1%, -20% ke liye +25%, -30% ke liye +42.9%, -50% ke liye +100%, aur -75% ke liye +300%. Formula: gain = 1 / (1 - loss) - 1. Is liye investor ka pehla kaam paisa banana nahi, gehre gaddhe se bachna hai.
Har method mein haar ka silsila aata hai. 40% win rate par 100 trades mein kam az kam ek baar 5 lagataar nuqsan ka imkaan takreeban 98% hai. 8 lagataar nuqsan 1% risk par 7.7%, 5% risk par 33.7% aur 10% risk par 57% le jate hain. Method wahi, sirf size ka farq. Pehle se likh lein: -10% par risk aadha, -15% par do hafte ka break aur review.
Quran 65:2-3: jo Allah se darta hai, Allah us ke liye raasta nikalta hai aur wahan se rizq deta hai jahan se gumaan na ho, aur jo Allah par bharosa kare, Allah us ke liye kaafi hai. Nuqsan ke baad bari bets laga kar peecha karna jue wali soch hai. Risk kam karein, rukein, review karein aur bharosa rakhein.
- Nuqsan se zyada munafa wapsi ke liye chahiye: -50% ke liye +100%.
- Lagataar nuqsan aam hain; risk per trade tay karta hai ke gaddha kitna gehra hoga.
- Drawdown rules pehle se likhein aur nuqsan ke baad size kabhi na barhayein.
Poora sabaq neeche English mein hai. Quiz English mein hai; asaan alfaaz mein.
Rashid, a mobile-phone dealer in Sargodha, grew his trading account to Rs 400,000 and then hit a bad month. It fell to Rs 240,000, a 40% drawdown. Desperate to 'get back to 4 lakh', he doubled his position size and took trades he would normally skip. Two more losses at the bigger size took him to Rs 180,000. Now he needed more than +122% just to get home. The math had been against him from the first loss; desperation made it worse.
Losses and gains are not symmetrical
A drawdown is the fall from your account's highest point to its lowest point before a new high. The key fact: the gain needed to recover is always larger than the loss, because you are growing a smaller base. The formula is: gain needed = 1 / (1 - loss) - 1.
- -10% needs +11.1%
- -20% needs +25%
- -30% needs +42.9%
- -50% needs +100%
- -75% needs +300%
Losing streaks are normal
Up to about -20%, recovery is realistic with patience. Beyond -30% the climb becomes steep, and beyond -50% it can take years, if it happens at all. So the first job of any investor is not to make money. It is to stay out of the deep hole.
Every method loses in streaks, even good ones. With a 40% win rate, the chance that any particular 5 trades are all losses is 0.6 to the power 5, about 7.8%. But over 100 trades, the chance of meeting at least one streak of 5 losses is about 98%, and of 7 or more about 70%. If you cannot survive that streak at your chosen risk, your risk is too high, however good your method is.
Size decides the depth, rules decide the floor
Risk per trade decides how deep a normal streak takes you. Eight losses in a row cost 7.7% at 1% risk, 33.7% at 5% risk and 57% at 10% risk. The method is the same in all three cases; only the size changed.
Write your drawdown rules in calm times. A simple set: at -10% from your account's peak, cut risk per trade in half. At -15%, stop live trading for two weeks, review your journal and practise in Chart Replay. At -20%, stop and rebuild the plan before trading real money again. These rules feel strict until you meet the alternative.
Worked example: Rashid's hole, and a better path
Rashid: Rs 400,000 to Rs 240,000 is a 40% drawdown. Recovery needed = 400,000 / 240,000 - 1 = 66.7%. After doubling his size and falling to Rs 180,000, recovery needed = 400,000 / 180,000 - 1 = 122.2%.
With the rules above: at -10% (Rs 360,000) his risk per trade would have been halved, and at -15% (Rs 340,000) he would have paused. From Rs 340,000, recovery needs 400,000 / 340,000 - 1 = 17.6%. Same trader, same bad month, a very different hole.
Quran 65:2-3 promises that whoever is mindful of Allah, He makes a way out for him and provides for him from where he does not expect, and whoever relies on Allah, He is sufficient for him. A drawdown tests this. The panicked response is to chase the loss with bigger bets, as if provision depends on getting back to the old number this week. The believer's response is calmer: cut risk, pause, review, and trust that provision is not tied to one account. Chasing losses is the gambler's path, not the path of trust.
Education, not a fatwa. Where scholars differ, we say so. See what scholars say.
Increasing position size after losses to 'win it back faster'. The math punishes this twice: the account is smaller, and the bigger bets turn a normal losing streak into a deep hole. Most blown accounts do not die on one trade; they die in the weeks after a drawdown, when the trader stops following the plan.
Open the BTC weekly chart. Pick one of its big past falls and find the highest weekly close before it and the lowest weekly close after it. Calculate the drawdown in % and the gain needed to recover, using gain = 1 / (1 - loss) - 1. Count how many weeks price took to return to the old high. Write in your journal what that would have meant for someone with everything in one coin.
Measure a real drawdown →Key takeaways
- Recovery needs more than the loss: -20% needs +25%, -50% needs +100%, -75% needs +300%.
- Losing streaks are normal; your risk per trade decides how deep they take you.
- Write drawdown rules in advance: cut risk, pause and review before the hole gets deep.
Check yourself
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Barqish is an educational platform. Nothing here is financial advice or an instruction to buy or sell, and screening is not a fatwa. Spot ownership only: no leverage, no short selling. Updated 30 September 2026.