In day trading, it is not just when you are on a losing streak that you need to pay attention to your mental state.
I actually believe that you need to be just as careful when you are on a winning streak.
I won three days in a row.
I haven’t lost at all this week.
I won two trades in a row since this morning.
The stock I targeted moved exactly as I expected.
When you are in this state, you naturally feel good.
And little by little,
“I can do this today too.”
“I have a really good read on the market lately.”
“I might be able to make a profit even if the conditions are a bit poor.”
These kinds of feelings can start to emerge.
As a result, you stop looking as closely at the indices you were carefully checking before.
You enter trades in places you would normally pass on.
You increase your lot size.
You make one extra trade just because you are already in profit.
Before you know it, your trading has become different from when you were winning.
To understand situations like this, it is helpful to know about “overconfidence bias.”
In this article, I will explain why trading tends to become sloppy after a winning streak, and what you should keep in mind when things are going well.
What is overconfidence bias?
Overconfidence bias is a psychological tendency to evaluate one’s own abilities, knowledge, and the accuracy of one’s judgments more highly than they actually are.
In simple terms for day trading, it is a state where you evaluate your judgment more highly than necessary, thinking:
“I have a pretty good read on the market.”
“My recent wins are due to my own skill.”
“I can definitely make a profit on this.”
Of course, having confidence itself is not a bad thing.
If you cannot trust your own rules, it becomes difficult to even enter a trade.
The problem is when
“confidence”
turns into
“overconfidence.”
It is easy to feel like you have improved after a winning streak.
For example, suppose you have made a profit for three consecutive days.
Then, you feel,
“I’ve been doing really well lately.”
If you win five times in a row,
you start to think,
“I’ve become a better trader.”
This is where the trap lies.
You might think, “Maybe my strategy is finally coming together.”
However, day trading results are influenced not only by your own skill but also by the market environment of the day.
The market conditions were favorable for your style.
The indices had a clear direction.
The stocks you were watching had high volume.
Capital was flowing into the entire sector.
Your strategy and the day’s market were perfectly aligned.
It is possible that these factors overlapped.
Even so, when you go on a winning streak,
it becomes easier to think,
“The market was easy to trade”
rather than,
“I was good.”
This is where overconfidence can begin.
Why do you change your trading even when you are winning?
I believe this is extremely important.
The fact that you are on a winning streak means that the trading you were doing up until then was working well.
If so, you should ideally just keep doing the same thing.
However, for some reason, when you go on a winning streak, you may find yourself wanting to change your trading.
This is a point that I find extremely important.
Trading 300 shares instead of the usual 100.
Entering trades in spots you would normally pass on.
Continuing to trade after 10:30 AM, even though you usually stop by then.
Entering based only on individual stocks instead of checking the index as you usually do.
Entering with a market order in a rush instead of using a limit order as you usually do.
In other words,
you may find yourself “increasing the difficulty level on your own just because you won.”
This happens.
This is a huge waste.
If the reason you were winning was because you followed the rules, there is no need to change those rules precisely after a winning streak.
“I’m still in the green even if I lose today” is dangerous
When you make a profit in the morning,
you might think,
“I’ve already won 10,000 yen today, so it’s okay if I lose a little.”
You need to be careful with this way of thinking.
For example, suppose you are up 20,000 yen as of 9:30 AM.
Even in a situation where you wouldn’t normally enter,
you might enter thinking,
“I’m still in the green for the day even if I lose about 5,000 yen.”
And then you lose.
Still up 15,000 yen.
“One more time should be fine.”
I enter again.
I lose.
This is how profits gradually dwindle away.
In some cases, you might lose all your morning profits and end up in the red.
The problem is that
“I have profits, so it’s okay to take risks”
is what you started thinking.
From the market’s perspective, it doesn’t matter how much you’ve won today.
All that matters is whether that entry has an edge.
The psychology of wanting to increase lot size
When you have a winning streak,
“If I can make this much with 100 shares, I can earn even more with 500 shares.”
You start to think like that.
Mathematically, that is correct.
If a price movement earns 5,000 yen with 100 shares, it’s 25,000 yen with 500 shares.
However, losses also increase fivefold.
Furthermore, when the lot size increases, your psychological state may also change.
Even if you could calmly hold through a price movement with 100 shares, with 1,000 shares, the amount of unrealized loss might bother you, causing you to cut the position immediately.
Conversely, you become reluctant to lock in a large loss, making it impossible to cut your losses.
In other words, changing your lot size does not necessarily just change the amount of profit and loss.
Your actual trading behavior itself may change.
That is why I believe it is dangerous to suddenly increase your lot size just because you have had a winning streak.
Entry criteria also become lax
The scary thing about overconfidence bias is that it is difficult for the person themselves to notice that they are becoming sloppy.
At first,
“The daily chart looks good”
“The index is strong”
“It is above the VWAP”
“There is also volume”
“It is at the spot I was targeting on the 5-minute chart as well”
You were checking multiple conditions like these.
However, once you have a winning streak,
“It looks like it will go up because the daily chart is good”
You enter based on that alone.
If you get even more carried away,
“It feels like it will go up”
You enter based on that.
In this way, your entry criteria can gradually become lax.
And when you lose,
“The market is acting strange today”
is what you end up thinking.
However, in reality, it is possible that the market hasn’t changed, but your entry criteria have.
It might just be that the market environment was favorable.
In my case, I place significant importance on the correlation with the index.
Therefore, I find it relatively easy to trade on days when the Nikkei 225 has a clear direction and individual stocks follow the index obediently.
Conversely,
the Nikkei 225 barely moves.
It just swings up and down without a clear direction.
Individual stocks don’t follow the index either.
I am cautious on days like these.
What is important here is
the fact that
“I was winning until yesterday.”
Even if the market conditions you excel in have continued until yesterday, it doesn’t mean today will be the same.
When you are on a winning streak,
“I’ve been winning lately, so I can do it today too”
becomes an easy thought to have.
However, your wins and losses until yesterday are separate from today’s market conditions.
Every morning, you need to confirm from scratch whether today’s market conditions suit your strategy.
There is no need to try to protect a winning streak.
Conversely, sometimes you can become too cautious after a winning streak.
“If I win today, that’s six in a row.”
“I’ve come this far without a loss, so I don’t want to break the record.”
Thinking this way can sometimes make you afraid to realize a loss.
Even when it’s a situation where you should just take a small loss,
“I don’t want to lose, at least not today.”
You end up holding onto the position.
However, a winning streak record is meaningless.
Even if you lose once after five consecutive wins, it doesn’t mean your previous profits disappear.
What matters is not the number of consecutive wins, but whether you are remaining profitable in total.
There is no need to aim for a 100% win rate.
“A winning trade does not equal a good trade.”
I believe this is quite important in day trading.
You entered the trade ignoring your rules.
It happened to go up.
You made 10,000 yen.
If you look only at the result, it’s a win.
However, if you store that as a successful experience,
You start thinking, “I can win even with this entry method.”
And then you repeat the same thing.
Conversely,
You enter according to your own rules.
The rationale collapsed, so you cut your losses.
A loss of 3,000 yen.
Looking only at the result, it is a loss.
However, as a trade, it followed the rules.
I believe it is important to look at not only “how much you won” but also “how you won.”
It is important to look at not only “how much you won”
but also “how you won.”
I believe it is important to look at not only “how much you won”
but also “how you won.”
I believe it is important to look at not only “how much you won”
Confirm “what went well” precisely when you are on a winning streak
When you are on a winning streak,
instead of ending it with “I’ve gotten better,”
confirm why you were able to win.
Was there a sense of direction in the index?
Was there a sense of direction in the index?
Were you able to select strong stocks?
Were you able to target only those above the VWAP?
Were they stocks with sufficient volume?
Was it a good position on the daily chart?
Were you able to wait for entries without rushing?
Were you able to cut losses or exit at breakeven?
By breaking down the reasons for your wins like this,
it becomes easier to think that
it is not that
“your ability suddenly improved,”
but rather that “your rules and the market environment were well-aligned.”
Do not suddenly change your lot size even if you are on a winning streak.
A simple way to counter overconfidence bias is to keep your lot size fixed.
“I’m on a roll today, so I’ll double it.”
“I’ve won three in a row, so I’ll trade 500 shares next.”
Do not make changes based on your emotions at the moment.
If you are going to increase your lot size,
do it based on your performance over a certain period,
your maximum loss,
or your win rate.
Average profit.
Average loss.
Whether you can make the same decision with that lot size.
Make changes systematically after reviewing these factors.
It is important not to decide your lot size based on the euphoria immediately after a win.
Beware of the “one more time” mentality
There is a phrase I personally try to be careful about in day trading.
That is,
“One more time”
.
You made a profit.
“Maybe I can take one more.”
You won again.
“I’m on a roll today, so one more time.”
If this “one more time” is a situation you are good at, there is no problem.
However,
“I want to enter because I’m winning”
is a different story.
The reason for entering is,
“Because I’m winning today”
Instead of that,
“Because the conditions are met right now”
is how it should be.
Start from 0 wins and 0 losses every morning, even after a winning streak
I believe it is important to think about yesterday’s results and today’s market separately.
Even if you were up 30,000 yen yesterday, it has nothing to do with today’s market.
Even if you are on a 5-game winning streak, it has nothing to do with today’s index.
Conversely, even if you lost yesterday, it has nothing to do with today’s opportunities.
Every morning,
0 wins, 0 losses.
0 yen in profit.
0 yen in losses.
Look at the market from that state.
How is the Nikkei Stock Average today?
How are the futures?
Which sectors are strong?
Is there volume in the stocks on your watchlist?
How is the daily chart?
What is the position relative to the VWAP?
Does it look like my strategy will work today?
It is important to look only at today’s market, not at the results up until yesterday.
Check your rules even more when you are on a roll.
I think many people reflect on their trading on days they lose.
However, on days they win,
“Today went well”
is how it usually ends.
I believe that it is on the days you win that it is worth checking,
“Did I win by following the rules?”
to confirm.
Was there any trade that was saved by pure luck?
Did you add to your position when it wasn’t planned?
Did you increase your lot size?
Did you enter without looking at the index?
Did you enter a position where you would normally have stayed on the sidelines?
Look to see if bad habits are being hidden by the fact that you won.
If you can correct your behavior while you are still in profit, it becomes easier to prevent large losses.
Summary | Just because you are on a winning streak, there is no need to change who you are.
Winning streaks are a good thing.
If your profits are accumulating, there is no need to deny the results themselves.
However, because you have been on a winning streak,
“I can read the market.”
“I can win today even if I’m a bit sloppy.”
“It’s fine to increase my position size.”
“I can probably grab one more win.”
If you start thinking like this, you need to be careful.
If the reason you were winning was that:
You were choosing strong stocks.
You were checking the indices.
You were watching the VWAP.
You were checking the daily chart.
You were watching the volume.
You were waiting for the right entry.
You were cutting losses or exiting at breakeven.
Then you should just keep doing the same things even after a winning streak.
There is no need to make trading difficult for yourself when you are already winning.
And,
“Winning does not necessarily mean you were right.”
It is not always the case.
A trade where you followed the rules and took a small loss can sometimes be more valuable in the long run than a trade where you broke the rules and won.
It is precisely when you are on a winning streak that you should
Don’t think “I’m good.”
Instead,
look at “why you were able to win.”
look at it.
Even if you had a 5-day winning streak until yesterday, today’s market is today’s market.
Start every morning at 0 wins and 0 losses.
Trade as usual, especially when you are on a roll.
Understanding overconfidence bias can be a hint to prevent your trading from suddenly falling apart after a winning streak.
For those who want to learn more about day trading
On YouTube, I hold a day trading LIVE stream every morning from 8:30.
While watching the actual market, I explain indices like the Nikkei Stock Average, as well as decisions on entries, profit-taking, and exits in real-time.
▶ Click here for YouTube
[YouTube Link]
For those who want to learn in more detail
In the YouTube membership, I release content that cannot be fully conveyed in regular videos or LIVE streams through exclusive videos.
Regarding past videos and LIVE streams, those that have passed a certain period since publication are changed to member-only content as needed.
▶ Click here for membership details
[Membership Link]
For those who want to practice day trading with a game
I believe that day trading is not just about memorizing knowledge, but also about repeatedly making decisions such as “buy, sell, wait, or exit” while watching the market.
Therefore, I have released a day trading game where you can practice the concepts I value in actual trading, such as indices, market sentiment, and supply and demand, in a game format.
▶ Click here for the day trading game
[Link to the game sales note]
https://note.com/nihonnkaburabo/n/nc925792b480d
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I write articles about day trading methods and concepts, trading psychology, and points I am conscious of in the actual market.
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※ This article is provided for the purpose of learning investment knowledge and concepts, and does not recommend the buying or selling of specific stocks or financial products. Investment carries the risk of loss, including the loss of principal. Please make actual investment decisions based on your own judgment and responsibility.
