Recovery Strategy

A recovery strategy is a pre-defined plan for rebuilding capital after a significant drawdown. It focuses on scaling back into the market using only high-conviction, low-risk setups rather than attempting to recover losses quickly.

The strategy emphasizes consistency over speed, acknowledging that trying to "make it all back" at once often leads to further losses. In crypto derivatives, this might involve reducing leverage, shifting to less volatile assets, or tightening risk parameters.

A good recovery strategy is rooted in psychological stability and disciplined execution. It removes the pressure of needing to perform by setting small, achievable goals.

By focusing on the process rather than the outcome, the trader gradually regains confidence and account balance. This is a critical aspect of long-term sustainability in trading.

It ensures that the trader does not fall into the trap of revenge trading during the recovery phase.