Recovery Factor
Definition
Recovery factor is calculated by dividing net profit by maximum drawdown. A recovery factor of 3.0 means you generated 3x as much profit as your worst drawdown. Higher values indicate more efficient use of risk.
Recovery factor is one of the most practical metrics for prop traders because it directly answers the question: 'How much profit am I generating for the drawdown risk I'm taking?' A recovery factor below 1.0 means your max drawdown exceeded your total profit — not sustainable for prop trading.
For prop firm evaluations, you can use the recovery factor to estimate your probability of success. If your historical recovery factor is 5.0, and the firm requires a 10% profit target with a 10% max drawdown, your expected profit would be 5x your expected drawdown — giving you a comfortable margin.
Traders should aim for a recovery factor of at least 3.0 for prop trading viability. Below 2.0, you're essentially relying on luck to pass evaluations because your profit margin over drawdown is too thin. PropJournal calculates your recovery factor and trends it over time so you can see if your risk efficiency is improving.
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