Recovery Factor Calculator
Evaluate strategy resilience by comparing total net profits to maximum peak-to-trough drawdown.
How the Calculation Works
Read parameters and compute total exposure: multiply order quantity by contract unit multiplier.
Evaluate terminal return at the selected target price using strict financial mathematical boundary logic.
Deduct upfront capital commitments, taxes, or net debits to produce final net profit or loss realization.
Calculation Formula
Example Calculation
₹1,50,000 net profit with a maximum drawdown of ₹30,000.
Total strategy profits were 5 times larger than the worst historical equity dip.
Assumptions & Parameters
- Maximum drawdown evaluates the deepest historical peak-to-trough equity decline.
Frequently Asked Questions
What is recovery factor?
A performance metric measuring how easily a strategy generates profits relative to its deepest drawdown.
What is a strong recovery factor score?
Values above 3.0 to 5.0 over multi-year backtests indicate strong capital recovery ability.
How is recovery factor different from profit factor?
Profit factor compares gross gains to gross losses; recovery factor compares net profit to deepest peak-to-trough equity drop.
Can recovery factor be negative?
Yes, if the trading account is currently in net negative territory.
Why do institutional allocators inspect recovery factor?
It demonstrates whether a trader can withstand adversity and recover without requiring fresh cash injections.
How does risk sizing impact recovery factor?
Smaller risk sizing caps drawdown depth, which directly boosts the recovery factor ratio.