Market Opportunities

Traders strive to control risk by constantly battling "drawdown", or capital lost in the markets. This lost capital will require extensive efforts to re-gain.

If a trader starts with a $10,000 account and loses $1,000 on the very first trade, the account is down 10%. In order to re-capture that $1,000, the next trade would require more than 10% of the remaining balance of $9,000, to regain the original balance.

$10,000 starting balance
- $1000 lost capital 10.00% Loss
$9000 remaining capital

To regain the $10,000 balance,

$1,000 capital to re-gain ÷ $9,000 current balance 11.11% to re-gain

The greater the drawdown, the greater the percentage returns the trader must achieve in order to regain the entire original balance. Consider the following table:

%Capital Loss % Gain Required to Break Even
10%11.11%
20%25.00%
30%42.85%
40%66.66%
50%100%
60%150%
70%233%
80%400%
90%900%