The numerical signature: time and size
This bias leaves two measurable marks in any record, neither requiring introspection:
- Time between trades drops sharply after a loss relative to your average.
- Position size rises after a loss instead of staying constant.
When both appear together the effect compounds: a weaker trade taken at a larger size. This is where risk of ruin stops being theoretical, because raising risk after losses is precisely what makes an ordinary streak fatal.
Measuring a bias you cannot feel
Behavioural biases are not fixed by general advice, because in the moment they do not feel like biases — they feel like sound decisions. The only practical approach is for each bias to have a measurable signature in your trade record.
So each page here gives the numerical marker that exposes the bias rather than asking you to "be disciplined". You do not need to be told to have discipline; you need to know whether you currently lack it.
A worked example
A $1,000 account risking 1%. One loss leaves $990 — barely an effect.
Doubling size after each loss to make it back produces a completely different path: $10, then 20, 40, 80, 160. Five consecutive losses — statistically ordinary where the win rate is 40%, occurring 7.8% of the time — cost $310, or 31% of the account, against $49 or 4.9% had risk stayed fixed. The system did not change, nor the streak; only the reaction to it did.
Common mistakes with this term
- Raising size after a loss to recover faster, turning an ordinary drawdown into an unrecoverable one.
- Entering immediately after a loss with no new signal from the strategy.
- Reading a single loss as proof the analysis was wrong, when it is an expected outcome of any probabilistic system.