The Greed Psychology
After a 3-5 winning trades streak, traders get greedy. "My system is working perfectly! Let me increase size to 2-3x normal." This greed-driven overleveraging is the #1 reason traders blow accounts. One 20-pip reversal on a 3x position turns into catastrophic loss.
How Overleveraging Destroys Accounts
The Scenario:
- Normal position: 0.5 lots on $50,000 account (1% risk)
- After 4 wins, greed kicks in: "I'll double to 1 lot!"
- Next trade goes against you 20 pips
- 1 lot × 20 pips × $10 = $200 loss (4% account)
- Account now $48,000. Drawdown limit approached
- Panic sets in. Trader makes emotional decisions
- Account spirals: $48k → $45k → $40k → Account closed
One overleveraged trade started the cascade. This scenario happens thousands of times daily in trading.
The Greed Triggers
Trigger 1: Winning Streak - After 3+ consecutive wins, confidence soars. Greed says: "Increase size."
Trigger 2: Big Win - One massive profit makes traders feel invincible. Next trade gets 2-3x normal sizing.
Trigger 3: High Account Peak - Seeing account at all-time high makes traders risk more to reach new peaks faster.
Trigger 4: FOMO Watching Others - Seeing others' large profits makes traders overleveraged trying to catch up.
The Discipline Solution
Rule 1: Fixed Position Sizing
Maintain same position size regardless of wins/losses for minimum 3-6 months. No exceptions. After proving your strategy over hundreds of trades, only then consider adjustments.
Rule 2: Profit Targets
Set daily profit targets. After hitting $1,000 profit for the day (for $100k account), stop trading. This caps gains but prevents greedy overleveraging.
Rule 3: Stop Trading After Big Wins
After a 3:1 RR win (big profit), take the rest of the day off. Process the win psychologically before next trades. This prevents revenge of greed.
Rule 4: Reduce After Wins
Counter-intuitively, some pros reduce position size after big wins. This locks profits and prevents overleveraging.
The Mathematics of Overleveraging
Trader A: Wins $5,000 (5% gain) on 0.5 lot position, keeps size constant
- Continues with 0.5 lot sizing
- Next 10 trades: 6 wins, 4 losses = +$3,000 net
- Total after streak: +$8,000 (8% gain)
Trader B: Wins $5,000, overleverages to 1.5 lots next trade
- Next trade loses 20 pips = -$300 loss (6% account loss)
- Panics, overleverages to 2 lots trying to recover
- Next trade loses 30 pips = -$600 loss (12% account loss)
- Account now down $8,000. Margin called.
Spotting Greed in Your Trading
Sign 1: Increasing Size After Wins - You risk more after winning. This is greed. Stop immediately.
Sign 2: Rushing Entry After Missing Trade - You missed a 100-pip move and now chase the reversal with 2x size. This is FOMO-driven greed.
Sign 3: Not Taking Profits - Holding winners hoping for bigger profits. Sometimes this works, often it reverses and you lose it all.
Sign 4: Trading When Limit Reached - You hit your daily limit but keep trading "one more." This is greed in pure form.
Real-World Greed Example
Mike trades $100k account. His plan: Risk 0.5% = $500 per trade with 0.5 lot size. First week he makes 3 trades: - Trade 1: Wins $1,500 (3:1 RR) - Trade 2: Wins $1,000 (2:1 RR) - Trade 3: Wins $750 (1.5:1 RR) Now he's up $3,250 in one week! Greed strikes: "My system is crushing it. Let me double to 1 lot for next week." Trade 4: Loses 50 pips on 1 lot = -$1,000 loss Mike's account: $102,250 → $101,250 Still profitable! Greed intensifies: "Let me go to 1.5 lots!" Trade 5-6: Two consecutive losses at 1.5 lots = -$2,250 losses Account: $101,250 → $99,000 Now panicked and overleveraged at 2 lots: Trade 7: Another loss = -$1,600 Account: $99,000 → $97,400 By breaking his fixed sizing rule, Mike lost $2,600 of his $3,250 profit. One week of greed destroyed two weeks of solid trading.
FAQ
A: No, but only after 6+ months of consistent results. Increase gradually (10-20% at a time). Most traders should keep fixed sizing indefinitely.
A: Some pros do this psychologically. If you find yourself overleveraging after wins, yes – take the rest of the day off to process the win.