It was a Tuesday afternoon and I was down seven trades in a row. Not catastrophically, but enough. I remember staring at the screen and thinking, "the next one will fix it." That exact thought — that seductive, lying thought — is where it all unravelled. I doubled my position size. Classic.
What I was doing has a name: gambler's fallacy. I genuinely believed the market owed me a winner. It didn't. The market has never owed anyone anything. It especially doesn't care about your seven consecutive losses or your mortgage or your ego. I added to the position and dropped trade eight like a stone.
What the Market Wizards interviews taught me, eventually, is that every elite trader has a losing streak story. Paul Tudor Jones, Ed Seykota, Marty Schwartz — all of them. The difference isn't that they avoided bad runs. The difference is what they did when one hit. They got smaller, not bigger. They stepped back before the hole became a grave.
The psychological trap underneath all of this is loss aversion — the brain weights losses roughly twice as heavily as equivalent gains. So after a bad run, every instinct screams "recover it now." That instinct is neurologically wired and professionally dangerous. The traders who survive long careers learn to recognise that scream and do the opposite. They cut size, review the system, and wait. Boring, disciplined, alive. Understanding drawdown management as a formal concept — not just a feeling — is what separates traders who last from traders who have great pub stories about the year they blew up.
The market doesn't care how you feel. Your job is to still be here when conditions suit your edge again.
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