The moment is ringed. An invented chart, drawn to show the shape. Not market data.
Also searched aslosing streak trading · revenge trading · drawdown · consecutive losses
What you see
- The urge to make it back with the next trade.
- A larger size, a wider target or a skipped check on the fourth trade.
- A plan that is being changed while it is being used.
Why it happens
A streak says little about a method and a great deal about what comes next. The loss that damages an account is seldom one of the three. It is the fourth, taken larger and in a hurry.
What traders check next
- Were the three trades taken according to the plan? If so, the plan is doing what plans do.
- The size risked on each. At one per cent a trade, three losses cost about three per cent.
- Whether a pause is written into the plan: a number of losses after which the day ends.
Where people go wrong
- Doubling the size to recover.
- Changing the method after three trades, which is far too few to judge it.
- Trading something unfamiliar because the usual market ‘is not working’.
Questions people ask
- How many losses in a row is normal?
- With an even chance on each trade, a run of ten losses is to be expected about once in a thousand trades. Longer records contain longer runs.
- What is revenge trading?
- Taking a trade to win back a loss rather than because the plan calls for it. It is usually larger and less considered.
The words on this page
An explanation for study. It is not advice, a recommendation or a forecast, and a pattern or a situation described here says nothing certain about what a price will do next.