I averaged down a losing position
What to do now
Stop adding. Calculate the total risk of the position and compare it with your limit. If it is higher, reduce to the limit.
You added to a position that was already losing.
Protocol
- Adding to a loser is not allowed unless the plan says so in advance.
- Total risk of the position cannot exceed the limit.
- If you want to add, first close and then re-evaluate as a new trade.
Checklist before the next trade
Your own numbers
Why this happens and what is dangerous
The average price gets better, the pain feels smaller, and it feels like a plan. In fact it is an unplanned increase of risk.
Size grows exactly where your analysis was wrong. One bad idea then carries a multiple of the risk you accepted.
Short statements for this situation
- I do not add to what is not working.
- A smaller loss now beats a larger one later.
- Every addition is a new trade with a new risk.
- I cut size, not my stop.
- The first loss is the cheapest.
Related
This is a practical protocol for trading behavior, not medical advice or treatment, and not a promise of profit.