Recovery factor
Recovery factor — Net profit divided by maximum drawdown — how many times over the account earned back its own worst fall.
Profit on its own is not comparable between accounts, because it says nothing about what was endured to get it. Recovery factor divides the profit by the worst fall along the way, which turns "how much" into "how much, per unit of pain".
In plain English
Take the net profit for the period. Divide it by the deepest peak-to-trough fall the account suffered in the same period. A recovery factor of 3.0 means the account earned three times its own worst drawdown; 0.5 means the profit was half the size of the hole it dug at some point.
The appeal is that it is a risk-adjusted return using a risk measure traders actually feel. Sharpe and Sortino use standard deviation, which is mathematically respectable and emotionally meaningless — nobody has ever felt a standard deviation. Everybody has felt a drawdown, and this metric is denominated in them.
Below 1.0 is the number to notice: the account has not yet made back more than its own worst fall, which means a repeat of that fall erases the entire period. Above 3.0 is genuinely strong. As with every ratio, the sample size behind it decides whether it means anything at all.
The formula
Recovery factor = net profit ÷ maximum drawdown
- Net profit — the period’s total, after costs.
- Maximum drawdown — the largest peak-to-trough fall, in money, over the same period.
- Both must cover the same window. A recovery factor built from a year of profit and a month of drawdown is not a number, it is a mistake.
If the account never drew down, the denominator is zero and the ratio is undefined. TapeSheet shows an em dash rather than inventing a large number — which almost always means the sample is too short to have met a bad run yet.
Worked example — the demo account
The bundled demo account: 96 closed trades between 6 January 2025 and 9 April 2025.
| Net profit | +$4,293.45 | |
|---|---|---|
| Maximum drawdown | $3,005.56 | 10.97% of the peak it fell from |
| Recovery factor | 1.43 | 4,293.45 ÷ 3,005.56 |
A recovery factor of 1.43. The account earned a little under half again as much as its worst fall.
That is a modest figure and the honest reading is uncomfortable: a single repeat of the same drawdown would wipe out almost the whole period’s profit. Not a disaster, and not a result that should be described as robust either.
It is also the exact thing profit factor conceals. This account’s profit factor of 1.58 reads respectably; the recovery factor says the profit was won narrowly against the size of the hole. Two ratios, same trades, different questions — and this is the one that asks whether the return justified the ride.
Every figure above is from the demo account TapeSheet ships with — 96 closed trades, generated from a fixed seed. Open the same account →
What this does not tell you
The caveat is the part worth reading. Most tools put it in a footer, if they print it at all.
- Nothing about the drawdown’s duration. A 10% fall recovered in a week and one that took nine months give the same number. The second is far harder to trade through, and time-under-water is the metric that captures it.
- It scales with the period, so it is not comparable across windows. Profit accumulates while maximum drawdown does not, so a longer record almost mechanically produces a higher recovery factor. Comparing your year against somebody’s quarter is meaningless.
- The drawdown is balance-based, as it is everywhere a statement is the source. The true equity low was deeper, so the real recovery factor is worse than the one printed — and by an unknown amount.
- Nothing about whether the drawdown is over. An account currently in its deepest fall shows the same figure as one that recovered months ago. The number is a summary of history, not a description of where you are standing.
Where TapeSheet shows it
A tile on the Overview, next to maximum drawdown so the two are read together, with an em dash rather than a number when the account has no drawdown to divide by. It is also 20% of the Tape Score, where it is the only route by which drawdown enters the composite at all.
Questions
What is a good recovery factor?
Over the same length of period, above 3 is strong and below 1 is a warning — the account has not yet earned back its own worst fall. But the number climbs with the length of the record for arithmetic reasons rather than skill reasons, so the comparison only means anything between windows of similar length.
How is it different from the Calmar ratio?
Calmar is the same idea annualised: return over a year divided by maximum drawdown over a defined window, usually three years. Recovery factor is the raw, unannualised version over whatever period you have. Calmar is the one you will see in fund reporting; recovery factor is the one that works on a statement covering four months.
Why is mine undefined?
Because the account has no drawdown in the period — every closed trade left the balance at a new high, or close enough that it never fell from a peak. That happens on short samples and on very strong runs, and in both cases it means the metric has nothing to divide by yet rather than that risk was avoided.
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