Steps
Volatility rises; quotes widen or disappear.
Your stop triggers because bid/ask moves.
The stop executes into a thin book (slippage).
Loss is larger than expected; fairness narrative forms.
You immediately re-enter to 'correct the injustice'.
Spreads are still wide; you pay again.
A second stopout occurs; anger escalates.
You size up, and the account breaks.
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
After a slippage stopout: pause. Do not re-enter during the same liquidity withdrawal regime.
Use a volatility gate: no new trades until spreads normalize.
Treat the first bad fill as a regime signal, not a personal insult.
- 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
Liquidity withdrawal is the hidden driver. Revenge is the accelerant.
Related: liquidity, slippage, tail risk.
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.