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Cool-down period

A required wait after a loss, a win, or a rule breach, before the next entry is allowed.

A cool-down does two things. It puts distance between an emotional event and the next decision, and it makes the sequence visible, since a rule you have to wait through is a rule you notice breaking.

Useful versions are short and mandatory: five or ten minutes after any loss, longer after a large one, and a cool-down after big wins too, because euphoria produces its own category of bad entries.

The one that matters most is the first minutes after a stop-out. Trades taken inside that window are, for most traders, the single worst-performing group in their record, and simply forbidding them changes monthly numbers.

Related: tilt-protocol, revenge-trading, daily-loss-limit, euphoria

See it drawn

Original diagrams for the ideas on this page. Illustrative, not real market data.

The mood around a market cycleA price path rising to a peak and falling to a trough, labelled with the feelings usually attached to each stage of the round trip.PRICETIMEOPTIMISMEXCITEMENTEUPHORIAANXIETYDENIALPANICCAPITULATIONDESPONDENCYHOPEOPTIMISM RETURNSMAXIMUM FINANCIAL RISKMAXIMUM FINANCIAL OPPORTUNITY
The mood around a market cycle. The same price path labelled with the feelings that tend to travel with it, from optimism up to euphoria and down through panic to despondency. Confidence is highest where the most money is already committed and prices are highest.

Educational only, not advice. Spotted an error? Post in Site Feedback.