Work it out
The starting values are an illustration, not a suggested trade or allocation.
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Worked example
A 20% loss from 10,000 leaves 8,000. A 25% gain on 8,000 returns to 10,000; a 20% gain reaches only 9,600.
Identify the two different bases
A loss percentage is measured against equity before the loss. A recovery gain is measured against equity after the loss. The same money amount is divided by a smaller base during recovery.
Keep deposits and withdrawals separate. Restoring a balance with new money is not the same as earning a return on the money that remained.
Derive the recovery formula
Let E be starting equity and d be the loss fraction. Remaining equity is E × (1 − d), and the amount lost is E × d. Required recovery gain is amount lost / remaining equity = d / (1 − d).
When using a loss percentage D rather than a fraction, recovery percentage = 100 × D / (100 − D). The starting equity changes the money amounts but cancels out of this percentage.
Verify a 20% loss
Starting from 10,000, a 20% loss removes 2,000 and leaves 8,000. Earning back 2,000 on 8,000 requires 2,000 / 8,000 = 25%.
A 20% gain on the remaining 8,000 adds only 1,600, ending at 9,600. The result remains 400 below the starting point. The calculator displays this equal-percentage-gain balance so the difference is visible.
Use a few reference points
A 10% loss requires an 11.1111% gain to recover. A 25% loss requires 33.3333%. A 50% loss requires 100%. A 75% loss requires 300%.
These are algebraic relationships, not forecasts. They explain the effect of a smaller denominator without suggesting that a large recovery return is available or likely.
Handle the 100% boundary
At a 100% loss, the remaining balance is zero. No finite percentage gain applied to zero can restore the starting equity, so the calculator does not display a misleading finite recovery number.
At a 0% loss, there is no amount to recover and the required gain is 0%. Values between those boundaries increase nonlinearly as the remaining balance gets smaller.
Keep the recovery number out of the next trade’s objective
The percentage describes the account’s arithmetic gap. It does not set a deadline, identify an opportunity, or justify increasing size after a loss. A new decision still needs its own assumptions.
This tool ignores future fees, taxes, additional losses, and contributions. Those would change the amount required or the accounting of the recovery. Use the result as a clear baseline, not a plan to force the balance back.
What this tool does not calculate
- Hypothetical arithmetic only; no recommended return target or timeline.
- No future costs, taxes, cash flows, or further losses are included.
- A recovery percentage does not estimate the chance of achieving that return.
Common questions
Why is the required gain larger than the loss percentage?
The gain is calculated on a smaller remaining balance. The amount lost is the same, but its denominator has changed.
Does the starting amount change the recovery percentage?
No. For the same loss percentage, the recovery percentage is the same. Starting equity changes only the money amounts.
Can a 100% loss be recovered through a percentage gain?
Not on the zero balance alone. Any finite percentage of zero is still zero. New capital would be a contribution, not a return on the lost balance.
Should I aim to recover it in the next trade?
The calculator provides no such recommendation. It states an accounting threshold without predicting a return or setting a recovery deadline.
Sources & method
An original calculation tool built with AI assistance. Its method and limits are documented here, and calculation examples are checked with automated tests.
About Second Trade Trap
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About Second Trade Trap