## The Recovery Paradox
After a significant drawdown, the instinct is to bet more aggressively to "recover faster." This is the opposite of what mathematics recommends.
## Why Aggressive Recovery Fails
To recover from a 25% drawdown: you need +33% growth from the lower point.
Aggressive recovery strategies that double stakes increase variance dramatically — they might recover faster in a lucky scenario, but in an unlucky scenario, they turn a 25% drawdown into a 50% or 75% drawdown.
The Kelly Criterion explicitly captures this: as your bankroll decreases, the mathematically optimal fraction stake also decreases. Betting the same fraction of a smaller bankroll means betting less in absolute terms — not more.
## The Proportional Response
If your bankroll drops from £2,000 to £1,500 (25% drawdown), your stake should drop proportionally:
- Original stake: 2% of £2,000 = £40
- Post-drawdown stake: 2% of £1,500 = £30
This automatic stake reduction is a feature of proportional staking, not a bug. It protects against ruin without requiring any decision.
## The Review Trigger
A 20-unit drawdown should automatically trigger a full strategy review:
1. Is the drawdown within the simulated variance range for your strategy? (If yes: expected, continue at reduced stakes)
2. Is there evidence of model error or strategy drift? (If yes: pause, fix, resume)
3. Have external conditions changed (market efficiency improvements, account restrictions)? (If yes: adapt)
## The Re-Scaling Protocol
After a drawdown and subsequent recovery back to the previous peak:
- Confirm the strategy is working before re-scaling stakes
- Scale stakes proportionally as the bankroll grows
- Do not jump back to pre-drawdown stakes immediately — grow back organically
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