Who this is for — Anyone looking at MDD in isolation. Recovery factor says whether cumulative profits justify maximum pain endured.
Recovery factor = historical net profit ÷ absolute max drawdown. Measures resilience: how many times total gain «covers» the worst drop.
In plain terms — How much you earned vs deepest hole — the method's shock absorber.
Formula and thresholds
Recovery Factor = Net Profit / Max Drawdown
| RF | Reading |
|---|---|
| < 2 | Fragile long horizon |
| 2 – 4 | Solid retail pro |
| > 4 | Very resilient (verify sample) |
Example: +30k net, MDD −10k → RF = 3.0.
Drawdown duration
High RF but 18-month recovery = psychological abandonment risk. Also track time from peak to new ATH.
Typical mistake — RF on 3 months of data — meaningless; need ≥ 1–2 years or large sample.
Example — 5-year backtest: net +45R, MDD −12R → RF 3.75; average recovery 4 months.
Summary card
- Formula: net profit / |MDD|.
- Pair: MDD + recovery duration.
- Min history: 12+ months live or robust backtest.
Silver path — Metrics module. Index: Silver path.
Links
Sources
- MetaQuotes, MetaTrader 5 Help — Testing Report — defines recovery factor as obtained profit relative to maximum drawdown in a testing report.
- CFA Institute, Portfolio Performance Evaluation — 2026 refresher reading — frames maximum drawdown, duration, and limits of performance measures.
- Investor.gov, Performance Claims — reminds readers that historical performance alone does not predict future results.