Trading Outpost

Your Next Trade Could Turn One Loss Into a Disaster

Every figure, level and attribution this video puts on screen, with where it comes from.

The research finding named in the video

Thaler, R. H. and Johnson, E. J. (1990). Gambling with the House Money and Trying to Break Even: The Effects of Prior Outcomes on Risky Choice. Management Science 36(6), pages 643 to 660. https://pubsonline.informs.org/doi/10.1287/mnsc.36.6.643

The published abstract reports real money experiments in which options offering a return to break even became especially attractive following losses. That is the whole of what the video attributes to it.

What it does not establish, and what the video therefore does not claim: that every trader increases risk after a loss, that the effect has a measured size in live trading, or that the three part framework used here is a validated diagnostic. The video states it as a temptation that can influence how risk is judged, which is the claim the paper supports.

Position size, stop distance and planned risk

CME Group, Proper Position Size. https://www.cmegroup.com/education/courses/trade-and-risk-management/proper-position-size

Establishes the relationship the video’s arithmetic rests on: planned monetary risk is quantity multiplied by the distance from entry to the planned exit. Either term doubles the exposure on its own.

The video uses its own hypothetical share example rather than the source’s futures one, and adopts none of that page’s suggested account percentages.

A stop price is not an execution price

FINRA, Stop Orders: Factors to Consider During Volatile Markets. https://www.finra.org/investors/insights/stop-orders-factors-consider-during-volatile-markets

Supports the distinction the video draws between the price that triggers a stop and the price a trade actually fills at, and the point that gaps and slippage can make a realised loss larger than the planned one.

The arithmetic drawn on screen

Every figure in the video is computed from the hypothetical stated in it, and each one is derived in the shot that prints it rather than typed into it.

On screen How it is derived
Planned exit 1.00 below entry Entry 24.00, planned exit 23.00
100.00 100 shares multiplied by the 1.00 move
200.00 200 shares multiplied by the same 1.00 move
300.00 The two amounts added, before costs
2.00x The second amount measured against the first
Wider stop, 200.00 100 shares multiplied by a 2.00 move
Equal risk, 100.00 50 shares multiplied by a 2.00 move
Planned 2.00R Target distance 2.00 divided by stop distance 1.00
Chased 0.87R Reward 1.40 divided by risk 1.60, entering at 24.60
Slippage 0.36 Stop 23.00 against a fill at 22.64
Actual 136.00 100 shares multiplied by the 1.36 move to the fill

Scope

The share trade, the price levels, the candle close example and the session timings are a hypothetical built to show the mechanism, and the chart series behind them are generated for that purpose. They are illustrative of arithmetic and of a stated rule, and no part of the video claims that any of it happened, describes a real instrument, or reports a result.

Entry quality here means only adherence to conditions written down beforehand. The candle close example does not assert that waiting for a close is universally better, and no pattern in the video is presented as guaranteeing an outcome.

The video gives no signals, no entries and no advice on what or when to trade.