DESK INSTRUMENTS
Drawdown Recovery
Losses and gains are not symmetrical, and the asymmetry compounds against you. A portfolio impaired by half must double to return to par. This table quantifies the cost of every level of drawdown — and explains, more persuasively than any argument we could construct, why the desk caps risk at one percent per position.
At 1% risk per position and a 1:3 reward-to-risk ratio, a winning position returns approximately 3% of equity. Adjust to model your own profile.
| DRAWDOWN | CAPITAL REMAINING | GAIN REQUIRED TO PAR | WINNING POSITIONS |
|---|---|---|---|
| −5% | €95,000 | +5.3% | 2 |
| −10% | €90,000 | +11.1% | 4 |
| −20% | €80,000 | +25.0% | 8 |
| −30% | €70,000 | +42.9% | 13 |
| −40% | €60,000 | +66.7% | 18 |
| −50% | €50,000 | +100.0% | 24 |
| −60% | €40,000 | +150.0% | 31 |
| −70% | €30,000 | +233.3% | 41 |
| −80% | €20,000 | +400.0% | 55 |
| −90% | €10,000 | +900.0% | 78 |
The asymmetry is the entire lesson. A fifty percent drawdown demands a one hundred percent return to recover — and at a realistic 3.0% per winning position, that requires 24 consecutive wins. This is why the desk caps risk at one percent per position rather than pursuing outsized returns. Capital that survives can compound; capital that is impaired cannot.
Capital remaining is illustrated on a €100,000 notional account. Winning-position counts assume compounding on remaining equity and no interim losses, and therefore represent the most favourable possible recovery path.