Steps
- Limit order partially fills.
- You chase the rest with worse prices (market or aggressive limits).
- Average entry drifts; stop must widen or becomes too tight.
- Position size ends up larger than the edge supports.
- Small adverse move triggers margin stress or panic exit.
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
- Define minimum fill and “accept smaller size” rule.
- No chasing fills. Cancel or live with the partial.
- Stops/targets recalculated from average fill.
- 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
Deep dive
This is a disguised psychology problem wearing an execution hat. The trader isn’t chasing price; they’re chasing completion.
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.