Steps
1) The trade goes against you and touches the planned invalidation.
2) You move the stop “just a bit” to avoid taking the loss.
3) Price keeps moving; you feel committed and add size to improve the average.
4) Margin usage spikes; volatility increases; spreads widen.
5) One more move forces liquidation or a panic close at the 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
• Pre-commit: a stop is an invalidation, not a suggestion.
• If you want discretion, convert it into a rule (time stop, volatility stop) before the trade.
• If you moved a stop once, stop trading that day. You’re no longer executing a plan.
- 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
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.