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The biggest loss often comes right after the best stretch
Published by The Retail Trader · AUG 09, 2026 · Trading Psychology
People think the most dangerous time in trading comes after a loss. Often it is the opposite. The biggest losses regularly come after wins, because that is when caution is at its lowest.
Nothing changes outside. Three things change inside: size grows, rules loosen, and the 'this is obvious' way of thinking creeps in.
These three things are what produce the one trade that eats up the whole good stretch.
In a small sample, luck and skill look the same. A streak of five wins can come from a good system and from a worthless one.
The trouble is that the mind reads both the same way — it takes a win as skill and a loss as bad luck. This is called self-attribution bias, and it is present in every trader.
Warning signs of overconfidence:
• You stop writing the journal, because 'everything is going fine'.
• Size rises quite a lot in a single week, without any written rule.
• You start taking setups that were not on your list.
• Stops start loosening, or it starts feeling like 'no need this time'.
• You start explaining trading to others, while your own sample is still small.
Size should grow — but with the account, not with your mood. If you are running a fixed percentage risk, size grows by itself as capital grows. Beyond that, if it has to be raised manually, it should be a rule written in advance.
A common method: raise size only when expectancy has stayed positive over a set number of trades — not when the last three trades went well.
A bad stretch follows every good stretch — that is the nature of the system, not a curse. Traders who tighten their rules during their good stretch have a short bad stretch. For everyone else, the bad stretch is the one in which all the money from the good stretch goes back.
This article is for educational purposes only — it is not a buy or sell recommendation, makes no claim of guaranteed returns, and is not advisory. Rules, rates and mechanics change from time to time at the exchanges, SEBI and RBI, so verify every number yourself with your broker or an official source.