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Tilt

An emotional state, usually after a loss, in which a trader abandons their plan and makes impulsive, oversized, or frequent trades.

The word comes from poker. On tilt, the goal silently shifts from executing the plan to getting the money back, which leads to revenge-trading and overtrading. It is the fastest way to turn a normal losing day into a max-drawdown.

The only reliable cure is stopping. A hard daily loss limit and a rule to walk away after two or three consecutive losses are the usual defenses.

Example: a trader loses 2R on the first trade, immediately doubles size to make it back, loses 4R, and ends the day down 9R against a plan that caps daily loss at 3R.

Related: revenge-trading, overtrading, daily-drawdown, trading-plan

See it drawn

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

An equity curve and its drawdownAn account balance rising over a year, falling from a peak to a trough, then climbing back to the old peak.ACCOUNT EQUITY$20k$12k$8k024681012TIME (MONTHS)PEAK $16,000TROUGH $12,000DRAWDOWN−25%RECOVERY
Equity curve and drawdown. An account balance plotted month by month. The fall from the $16,000 peak to the $12,000 trough is a 25% drawdown, and the shaded area lasts until the balance climbs back to the old peak.

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