The position was already down 4% when I added to it. Not because new information had arrived — but because I was convinced the move was overdone. The index had rallied six sessions straight, momentum was "stretched," and I had a mental model that said mean reversion was due. I was fading a trend I hadn't even bothered to define.
This is how it starts. You see a sharp move, your brain screams "too far too fast," and you step in front of it like a man trying to stop a bus with his hand. The logic feels sound in the moment. Prices don't go up forever. Rubber bands snap back. That's technically true — and completely useless without knowing when, and from where.
That particular week, the index ran another 3% after I'd entered short. I averaged down twice — each time using the same reasoning, which is to say, no new reasoning at all. By day four I was nursing a loss that would take six weeks to recover. The setup wasn't bad because I lacked data. It was bad because I'd decided the outcome before I'd analysed the structure.
The root cause wasn't overconfidence or greed — those are symptoms. The actual error was entering a counter-trend position without a catalyst. A structural break, a divergence signal, a macro trigger — something. Instead, the entire thesis rested on vibes and a vague sense that "this can't keep going." Reviewing the journal now, it's almost funny how thin the reasoning was. Almost. Resources like trend trading on Investopedia, the concept of mean reversion in finance, and momentum as a tradeable factor all point to the same lesson: fading requires evidence, not instinct.
The rule I wrote in red at the top of that month's journal page: No counter-trend entry without a confirmed structural reason — full stop. Feelings about "how far" a move has gone are not a strategy.
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