Steps
Early winners trigger fear of giving back profits
Stops move to break-even too soon
Normal retraces scratch trades
Average winner collapses; costs dominate
Trader increases frequency to compensate
Edge flips negative; account bleeds out
Intervention points:
- Cut size at the first sign the chain is forming.
- Pause when you start “fixing” the last loss with a new trade.
- Stop trading when execution quality degrades.
Antidote
Move stops only on structure, not emotion. Prove any break-even rule improves expectancy after costs.
- Stop the sequence: one loss is information, two losses is a warning, three losses is a system failure. Have a hard cut.
- Reduce degrees of freedom: fewer pairs, fewer timeframes, fewer discretionary choices.
- Re-enter only after reset: calm state, checklist passed, size reduced.
Notes
The hidden cost
This spiral rarely ‘blows up’ in one day. It dies quietly: lower expectancy, higher churn, higher frustration.
Related truth: Break-even stops starve expectancy.
Field checklist
- Define max heat (total open risk). You can’t manage what you don’t cap.
- Keep a free-margin buffer that survives a normal shock and a bad fill.
- Scale down after drawdown. Your job is to stop the bleed, not to win it back.
- Treat correlated positions as one position.
- Plan the gap: what happens if price jumps through your stop?