Steps
- Volatility event widens spreads or pulls depth.
- You keep using market orders to get in “on time.”
- Average fill worsens; you tighten stops to “fix” it.
- Stops trigger in noise; you re-enter multiple times.
- Equity curve dies by a thousand spreads.
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
- Spread gate + size cut.
- Switch to limits or wait for conditions to normalize.
- One attempt per setup in volatile regime (no re-entry loops).
- 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 chain is common because it feels like “discipline”: you keep taking your setup. The issue is that the environment changed, so the setup is no longer priced the same.
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.