Steps
Strategy has thin edge in theory
Live trading adds spread + slippage + swap
Average trade shrinks; variance stays
Trader increases frequency to ‘make it work’
Costs scale with activity; edge flips negative
Account bleeds and behavior degrades
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
Model total friction first. If the trade can’t pay costs comfortably, don’t trade it.
- 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
Why this is common
Costs are the silent killer because they don’t feel dramatic. They feel like ‘bad luck’ until you do the math.
Related truth: Costs are a strategy.
Field checklist
- Measure spread before entering. If it’s abnormal, you’re trading the wrong product at the wrong time.
- If volatility expands, reduce size first. Don’t “solve” it by widening stops with the same size.
- Avoid the predictable liquidity holes: rollover, session open/close, first minutes after data.
- Assume your stop may fill worse than your entry. Price the worst-case, not the brochure.
- If you cannot explain where liquidity comes from, trade smaller.