You bought the top. The price is down 30% and you are staring at a red portfolio. Should I cut my losses or hold and wait for a recovery? Should I average down to lower my cost basis? Every option feels wrong. That paralysis is normal — but acting from that emotional state is how a bad trade becomes a catastrophic one. Buying the top was the first mistake. The revenge trade, the panic sell, the desperate average down — those are the second, third, and fourth mistakes. Audit your impulse before you make any of them.
Checking this trade...
Or write the trade on your mind:
Checking this trade...
Related decision moments:
First, do not panic sell. Second, do not average down out of desperation. Third, audit your impulse before you make any decision. The worst trades happen in the emotional aftermath of buying the top.
You bought the top if: you bought because of extreme hype, the price has since dropped significantly, and you are now holding a loss. The cause was FOMO. The fix is not another impulsive trade.
Only if averaging down was part of your original plan at a specific price level. If you are averaging down because you cannot accept the loss and hope to lower your average, that is sunk cost fallacy — not strategy.
Accept the loss as tuition. Do not compound it with revenge trades. Audit what drove the original decision — FOMO, herd mentality, confirmation bias — and build a system to catch it next time.
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