How Long Do Strategies Take to Recover?

Drawdown recovery is the time it takes an account to climb back to its previous high after a fall, and it ranges from a few weeks to many years. In AlgolaneBots's historical backtests, recoveries after major falls took anywhere from 1 month to 41 months over the main test periods, and far longer in simulated older crashes. Recovery time depends on how deep the fall was, what the strategy holds afterwards, and how quickly the market itself bounces back.

The maths: losses need bigger gains to repair

The first thing to understand about drawdown recovery is that it is lopsided. A fall of a given percentage needs a larger percentage gain to get back to where you started, because the gain is calculated on a smaller amount.

Example: $10,000 falls 50% to $5,000. A 50% gain on $5,000 only gets you to $7,500. You need a 100% gain to return to $10,000.

This is why deep falls are so damaging. Up to about 20%, recovery needs a gain only slightly larger than the fall. Past 50%, the required gain grows very fast. A strategy that avoids the deepest falls does not need to be brilliant on the way back up; it simply has less to repair.

What "recovered" means

In this post, "recovered" means the account got back to its value just before the fall started. It does not mean it got back to where it might have been if the fall had never happened, and it does not account for inflation or for money added or taken out.

Two numbers are worth separating:

• Time to bottom: how long the fall lasted, from the peak to the lowest point.
• Time to recover: how long from the bottom (or from the start, depending on how it is reported) until the old high is reached again.

The facts below report recovery for crash periods as months to get back to pre-crash value, and for each strategy's single deepest fall as months after the bottom.

Recovery in three recent crashes

All figures here come from historical backtests, computer tests of each strategy's rules on past prices. Nobody earned them and future results will differ. The benchmark for the US strategies is the S&P 500; for Gold Breakout it is gold held.

Covid crash, 2020

The 2020 crash was very fast in both directions. Even the strategies that fell further than the S&P 500 recovered in a few months, because the market itself rebounded quickly and leveraged funds amplify a rebound as much as a fall.

Rate-hike bear market, 2022

2022 was a slower grind. The S&P 500 took 23 months to get back to its earlier high in this data. The US strategies in the backtest recovered within one or two months, largely because their rules moved them out of falling assets and into something else. That is exactly the kind of result that deserves the caveats below, because rules that happened to fit this period well may not fit the next one.

Financial crisis, 2007-2009

The financial crisis shows the other side. Market Switch's simplified version fell 96% and took 73 months to recover. Gold Breakout fell less than gold held but took longer to get back to its earlier level: 21 months against 14. A smaller fall does not always mean a faster recovery.

Caveats for each strategy

• Steady Growth: its seven names were picked because they already did well, which flatters the test.
• Big Tech Trend: the stock list was chosen with hindsight; three stocks made 81% of the profit.
• Market Switch: nearly half of its tested profit came from UVXY, and it failed outside the US.
• Leveraged Growth: its rules may be fitted to the years after 2010, and leveraged funds can lose value quickly.
• Gold Breakout: doubling trading costs cuts its yearly result roughly in half.

For full context on the long-run figures behind these crash periods, see how strategies held up in 2008, 2020 and 2022.

The longest waits

Some recoveries stand out because they took years.

• Gold Breakout at 2% risk had its deepest fall of 41% from May 2018 to October 2019 and recovered in March 2023, 41 months after the bottom. Over its full backtest from 2004, it returned +15.1% a year against +11.0% for gold held, whose own worst fall was 45%. Those long-run figures include that three-and-a-half-year wait.
• Market Switch's simulated dot-com version fell 100% and took 259 months to recover, against 78 months for the S&P 500. A fall that deep is close to unrecoverable in any practical sense.
• Leveraged Growth's simulated dot-com version fell 91% and took 115 months, against 78 for the S&P 500.
• Big Tech Trend is in a fall of 29% that began in June 2026 and has not yet recovered as of the end of the data. Its long-run backtest figure from 2011 is +37.3% a year against +14.0% for the S&P 500, whose worst fall was 34%.

The lesson is not that any one strategy is bad. It is that recovery time is a real cost, separate from the depth of the fall, and it rarely shows up in a headline yearly return.

What speeds up or slows down recovery

The depth of the fall

The table at the top explains most of it. A 20% fall needs a 25% gain. A 50% fall needs 100%.

What the strategy holds after the bottom

A strategy that moves back into rising assets early in a rebound recovers faster. One that is still defensive when the market turns may lag. Big Tech Trend and Steady Growth, for example, check monthly and weekly, so they adjust on their own schedule, not on the exact day the market turns. See weekly rebalancing for how check frequency changes behaviour.

Leverage

Leverage cuts both ways. Leveraged funds fall faster, but they also climb faster in a strong rebound, which is part of why Leveraged Growth recovered from its 2020 fall in about three months. In a long, choppy recovery, daily resetting can wear leveraged funds down instead.

Costs

Trading costs slow every recovery a little. For a cost-sensitive strategy like Gold Breakout, they matter more.

What you do

Adding money during a drawdown, or withdrawing it, changes your personal recovery time. Stopping a strategy at the bottom locks in the loss and means the account never recovers from that point in that strategy.

Getting back to even is not the same as making progress

Reaching the old high again only means the account has repaired the damage. Everything earned in the meantime by other choices, even cash earning interest, is ground the strategy has not covered. A strategy that spends 41 months recovering has, for those months, simply been climbing back.

This is why two strategies with the same yearly figure over 20 years can feel completely different to own. One might spend most of its time near new highs with short, sharp dips. The other might spend long stretches underwater followed by bursts of gains. The yearly average hides the difference; recovery time reveals it.

A simple way to see this in any backtest chart is to look at how often the line is at a new high. Long flat or falling stretches between highs are the periods you would have to sit through.

Using recovery time when choosing a strategy

A useful exercise: for each strategy you are considering, write down its worst fall, the gain needed to recover from it, and the longest recovery time in the data. Then ask honestly whether you would keep running it for that long without seeing a new high.

Many people find they can tolerate a deep fall that recovers in three months more easily than a moderate fall that takes three years. Others are the reverse. Neither is wrong. Our post on choosing a trading strategy builds on this, and max drawdown explained covers how the fall itself is measured.

Key takeaways

• Losses need bigger gains to repair: a 50% fall needs a 100% gain to get back to even.
• In historical backtests, recovery after major falls ranged from 1 month to 41 months over the main test periods, and far longer in simulated older crashes.
• A smaller fall does not always recover faster; Gold Breakout fell less than gold held in 2008 but took longer to recover.
• Leverage speeds up both falls and rebounds, and can wear funds down in choppy recoveries.
• Recovery time is a separate cost from depth; check both before choosing a strategy.

Watch a recovery happen on paper

Reading recovery tables is one thing; sitting through a fall is another. Run the five strategies on a $10,000 paper account during the free 90-day trial and see how each one behaves on the way down and on the way back. Start here; no card is needed. General information only, not personal advice; see the risk notice.