Steps
Initial stop → price approaches → move stop ‘for room’ → price continues → move again → thesis is now unfalsifiable → you add to improve average → margin tightens → forced close at worst price.
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
If you move a stop, you must also reduce size.
Better: stop out, reassess, re-enter only with a new thesis and new invalidation.
Never average down without a documented, testable reason.
- 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
Tell: if your stop is moving but your thesis isn’t changing, you’re not managing risk. You’re managing feelings.
Field checklist
- Write the rule in observable terms: if X, then Y.
- Remove choices under stress. Choices become rationalizations.
- Track the precursor: what state were you in before the mistake?
- Make deviations costly (size down, pause, review).
- Turn lessons into gates, not notes.