Why Winning Streaks Make Traders Lose Money

Six green trades in a row. That’s usually when I start losing money.

Not on the sixth trade. On the eighth or ninth — the ones I took because I felt sharp, sized bigger because the last few worked, and held a little longer because, well, I’d earned some room. The winning streak didn’t reward me. It set a trap and waited.

Traders talk about drawdowns like they arrive out of nowhere. In my experience they don’t. They get built during the good weeks, one small liberty at a time, and they only show up on the statement later. There’s a name for the mechanism behind it, and understanding it changed how I treat my own hot streaks.

Behavioral economists call it the house money effect. Once you’re up, your brain quietly reclassifies those profits as not really yours — like chips the casino handed you. You’ll gamble with house...

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