Recovery System

The recovery system uses the following parameters
Parameters

-	Basic lot size, this is the standard lot-size used by the EA as set for the parameter “Lot_Size_Value”
-	Maximum number of trades allowed to recover: default 10 - before reverting to basic lot size (even if loss has not been recovered or recovered partially, i.e., recovery system failed or partially failed).
-	There should also be a third parameter that stops the recovery process once a given % of the overall loss, from the losing trade(s), has been recovered. For instance, 90% of recovery plus 1 point
-	Maximum favourable excursion (MFE): double value which indicates the highest move in the market which is expected by the recovery system to occur. This value is furtherly broken down into the following:

o	Recovery System Profit Target in points (the amount of point the system will use to make profits on top of the recovered losses; this is usually 10% of the parameter below “Recovery System Target Profit”)
o	Spread in points
o	Recovery System Target Profit in Points (the amount of points the recovery system will use to recover losses)
o	Final “theoretical” Expected move in points
o	Lot-size correction increase – usually set at 0.01 to allow the lot size to get a bit higher than the calculation below would lead to (see below)



Explanation

The Maximum favourable excursion value is a value manually selected by me. It usually comes from an indicator such as the one used in the Expert advisor you have received. Just to give you an example, 
if the MFE is 50 points and the spread for a particular market is 9 points, I would then set the Recovery System Target at 5 points (10% of the expected move), 
so that the recovery system will look to make a profit of 41 points.
This way not only will it recover any losses for 36 points but also will make profits for 5 points (36 points + 5 points)

A working example

1.	Scenario: a signal was received from the indicator and a trade was opened at 0.10 GBP per point has just been closed in loss for - 3.00 GBP (30 points loss). The amount of loss must be 
saved for later use in an array I suppose.
2.	The recovery system is activated now since the previous trade was a losing one. Since the loss is small the system will work out that it is not necessary to have move of up to 50 points as for the MFE in 
order to recover the loss, but only 0.09 x 38.30 points; this will yield to a potential profit of £3.45, which includes the loss of £3.00 plus 5 points profits 0.09 x 5 = 0.45 GBP, 
as explained above about the parameters. This is *if* the trade is successful.
3.	However, if the trade is unsuccessful, for example – 5.00 GBP loss, then the loss is compounded with the previous one ( - 3.00 GBP – 5.00 GBP = - 8.00 GBP and saved for later use).
4.	When the next signal is triggered, a new trade is opened. Now the lot size will be: -8.00 GBP divided by (36 points recovery target) = 0.22…22  lot size per point + 0.01 lot size correction = 0.23 GBP per point.
5.	The Target Profit (TP) the system will set will be 39.80 points since: 8 GBP loss divided by 0.23 is 34.78 points (I approximate to 34.80)  to which you need to add 5 points as recovery system target profit,
 resulting in 39.30 points.
6.	If the market reaches 39.30 points, we will make £9.15, which will cover the 8 GBP loss plus 0.23 GBP x 5 points target profits = 1.15 GBP.
7.	As said above this carries on until:
a.	The loss, as for point 6, is recovered plus 5 points profits are made
b.	The recovery system exhausts the number of maximum trades allowed to recover as set in the parameter described above “Maximum number of trades allowed to recover”

8.	If the recovery system successfully recovers the losses within the “Maximum number of trades allowed to recover”, then it gets deactivated and the Expert Advisor starts again to open
 trades at the basic lot size (0.10 GBP per point or whatever amount is set).


Successful trades during the recovery

If the recovery system encounters a successful trade that does *not* reach the target for recovering the loss + making the target profit, e.g., 39.80 is not 
reached but 10 points are reached when a trade closes, this will have to be taken into account of course. The profits made but this trade will be subtracted to the 
total amount of loss still present. For example a new signal arrives from the indicator but we are a bit in profit already, for example 10 points in profit, so the
 current trade is closed and another one opens. This trade equals to zero loss, but the process still needs to continue until the leftover of loss has been recovered. 


Rationale
The idea is that as you have consecutive losing trades, the probability of unsuccessful trade NOT reaching the average value (expectancy per signal) 
DECREASES over time. That is P(unsuccessful trade| Maximum Favourable Excursion) is reduced over time.