A trader buys high, watches the price drop, then adds more positions hoping to average down. Instead, the speaker proposes a strict rule: don't re-enter or add to a losing trade until the recent low breaks decisively. This filter stops you from chasing the market and bleeding money.
You're looking too long anyway, right? But you see price start to move before and you start to assume I was going to go around me. Let me jump in, right? So you jump in here, let's say price then takes out that high, it comes back down and now you're seeing those profits come back down as well but you think still bullish and then you kind of start to forget your original plan. You start to buy in some more here thinking okay let me get in better price and then it continues down.
This is a very again a common mistake and it can be fixed with one strict rule. A strict rule for myself is if we ever are moving to the downside like this and I'm looking for a whole buy scenario to play out if we get a move to the upside and we take out highs, I will not buy this, this asset pair, whatever I'm trading until this low is taken out right here.
