I asked a handful of my esteemed colleagues on day trading TWTR the following question:
Is it psychologically harder for you to lose $100 five times in a row or $500 once?
These are their replies:
A: Tough one. Probably not a straight forward answer, but go with the five times. Sometimes I feel like I'm having a rough day, being stopped out of multiple very high rr setups. Then I look at my pnl and realise I'm only down X amount lol
B. Rather ask 1k or 5k. Probably 1k 5 times in a row
C. Honestly not any different. Sometimes if it’s 5 losses I forget how much it adds up lol
D. Thats a tough one. I would say the smaller amount over and over.
E. great question. Way harder to lose 5 times in a row. That would drive me crazy.
F. $500 [once] more likely. For my style
G. Probably 5 losses would be tougher. If it's one loss it's just an outlier. One mistake. 5 losses means I got to change something
H. Prolly the lump $500. Would you rather take 5 light slaps in the face, or a whopping, open palm bitch slap?
I. Probably the 5 times in a row
J. I would say 100 5x is harder for me. Once I take a loss I pretty much forget about it after a day and try not to let it affect me. And if I was losing 5x in a row then something is wrong for sure lol
K. It really depends on a few variables but I get the point of your question. It's more psychologically difficult when I lose a $ risk I'm not comfortable with yet through compounding, so in this case the larger sum. I've been in situations where I've taken -6,7,8 R at my $ in a day and can recover. But when I compound too high and risk something I'm not used to losing then it becomes harder, I need to be at that level consistently to have it normalized.
L. $500 once
M. If my normal risk per trade was $100 i would rather lose 5 times in a row than lose 5x my risk in 1 trade.
N. five times. No question
O. i'd rather lose $100 five times in a row, by far.
P. Depends if they were all calculated risk instead of emotional driven loses. It’s only hard when the losses are made on silly mistakes.
Q. I think $100 5 times because you start to question your system or your confidence may shatter slightly. As 500 at once is dependent on account size, day a 2000 account may affect you big time and you may question a lot, but on a 30k account I wouldn’t question it as much. And you start to question your entries and execution on the $100 losses as the $500 loss can be for maybe not stopping out on plan etc
R. I guess I always have a predefined stop so losing $100 five times in a row would be more draining than one larger loss...
S. Hmm. Probably equal. I think I'm a little too complacent about drawdowns. I think I should be more ready to reduce size than I am.
T. To answer: the former, but I've had way longer runs of losses. I distinctly remember 12 consecutive losing trades, which was disconcerting at the time. Overall I try to focus on process and P&L in percentage (or basis point) terms, rather than streaks of wins/losses or $ lost/gained.. If I had a day whereby I lost $100 5 times in a row, then made $500 once (i.e. net result break-even on the day), I'd consider it an ok day. In fact I have had such days multiple times. Hope that answers somewhat.
U. Difficult question. depends on the nature of the loss. When I looked at my initial reaction was the 500 would be because I f’d up, it's happened so that's hard to swallow and possibly the 100 losses are a result of the percentages going against me, which is natural
V. I think they are both equally damaging in their own way. i think you can rebound from a bigger loss than the small cuts. it all depends on your perspective though the 500 at once is a gamblers mentality and that is ingrained into people deeply trying to get rich on one trade and swinging for the fences while the 100 paper cuts are a strategy issue and most likely due to having too tight of stops....the $100 cut issue is far easier to manage and fix imo
W. Good question. Probably $100 five times in a row because if that happens then something is clearly wrong with my system or process.
X. now? neither one fazes me. i analyze what happened, whether it was my mistake (ie. wrong entry point, forced entry, too much size total, too much initial size so i couldn't add when it went against my entry, not enough volume in the stock, going against any of my hard and fast rules) or something in the market (ie. lately, stocks that have moved multi day aren't coming back in but flatlining on no volume, a 1999 JDSU buys SDLI at a 50%? premium and both stocks go up the entire day or YHOO has an RSI of 97 intraday on s&p entry and never goes down at all with RSI flatlining all day - those last two are pretty close to what happened). make sure my head is clear, and adjust accordingly.