Use a peak that came first
At each date, identify the highest earlier value and divide its difference from the current value by that peak. Here the loss is positive: drawdown = (peak − current value) / peak. Some reporting conventions display the same decline as a negative percentage.
The peak must precede the trough being measured. Selecting the lowest value in the entire sample and an unrelated later peak reverses the chronology. Current drawdown, maximum historical drawdown and the worst individual trade are different measures.
Worked path: 10,000 → 12,000 → 9,000 → 10,000
The prior peak is 12,000 and its subsequent trough is 9,000. Drawdown is 3,000 / 12,000 = 25%. Returning to 10,000 leaves the investment unchanged from its initial 10,000, but still 16.67% below the 12,000 peak.
Recovery from 9,000 to 12,000 requires 3,000 / 9,000 = 33.33%. For a loss fraction d, the required recovery is d / (1 − d). A 50% loss requires a 100% gain. The base has changed, so equal percentage declines and increases do not cancel.
What the historical number cannot promise
An observed 25% drawdown is not a ceiling on future losses. Different market conditions, leverage, simultaneous positions and execution can produce a deeper decline. Drawdown duration and time to regain the former peak matter as well as depth.
A record using only closed trades can hide unrealized losses. Daily valuations can miss intraday troughs. Depositing fresh cash must not be described as a recovery through trading profit: separate external cash flows before assessing performance.
A practical chart check
In Student Wyckoff Pro, select an available instrument and a consistent interval of closed bars. Mark a peak reached in sequence and the subsequent decline, recording dates and prices. Decide whether you use closing values or intrabar extremes; do not mix conventions.
This exercise measures an instrument’s price drawdown, not automatically the entire account. Portfolio analysis additionally needs position sizes, cash, expenses and fund movements. Save the marked workspace so the observation and chronological order can be checked again.
Primary sources
Sources explain the mechanics and limitations; the editorial examples use invented numbers rather than market quotations.
Your next practical step
Mark a peak and its later trough on your chart, then calculate the recovery percentage separately.
Open the first-chart instructions ↗