Psychology & process
Cognitive biases, journaling, losing streak protocols, and building a written plan.
Six failure patterns
Every behavioral failure has a structural antidote. You cannot reliably override cognitive biases in the moment under emotional pressure — so build rules that make the biased action structurally difficult before the emotion arrives.
Loss aversion
Hold losers too long. Fix: pre-define exits. A rule closes the trade — not your feelings.
Recency bias
Overweight recent trades. Fix: judge a system over 100+ trades, not the last few days.
Confirmation bias
Seek only confirming data. Fix: actively look for the opposing case before entering.
Gambler's fallacy
Feel a win is "due" after losses. Fix: size every trade identically. No makeup trades.
Overconfidence
Size up after wins. Fix: fixed fractional sizing — never based on how you feel.
Sunk cost fallacy
"Can't close now." Fix: would I open this fresh today? If no — exit.
The structural fix for loss aversion is…
Pre-trade checklist (7 gates)
A written checklist converts good intentions into a repeatable process. Tick every gate before you enter — if any fails, you don't trade.
Losing streak protocol
| Trigger | Action | Why |
|---|---|---|
| 3 losses in a row | Halve position size | Protect capital in a possibly bad regime |
| 5 losses in a row | Stop for 24h — review each trade | Distinguish system loss from discipline failure |
| Daily loss limit hit | Close all, done for the day | Prevent emotional compounding |
| 10% drawdown | Stop for 48–72h minimum | Psychological reset — the instinct to trade more is wrong |
After 5 losses in a row, the protocol says…