You add more to a trade that is already losing

You are down on it. The order window is already open, the price is better than the one you paid, and the second order feels less like a new trade than like a correction to the first one. You tell yourself the average comes down. It does. So does the distance between the position you are now holding and the one you decided to take.

Why the second order does not feel like a trade

The first position had a size, and you chose it before you were in, when nothing was at stake yet. The second one has a different author. It is sized by how far the trade has gone against you, and that is a number the market handed you rather than one you picked.

The better price is real too, and that is what makes this one hard. You are not imagining it. What is easy to miss is that you are now holding a bigger position than the one you had in mind at entry, and whatever you were willing to lose was a number about the smaller one.

There is one more thing and it is the quietest. Adding is a way of not deciding. Closing means saying the trade is over. Adding means it is not over yet, so nothing has to be said. In your own trades it shows up like this.

• You added at a price better than the one you paid, and you had not planned to add before you entered.
• The second order went in while you were watching the loss, not while you were watching the chart.
• You can say what your average price became. You cannot say what the whole position was risking by then.
• The add was bigger than the first entry.
• You closed the whole thing in one go later, because by then it was too big to sit in.
• You would not have taken the position at that size if it had been offered to you at the start.

Counting it from your own order history

Download a month of your trade book. Look for positions where your quantity went up after the first fill, in the same contract and the same direction. For each one, compare the price of the add with the price of the first entry. If the add was at a worse price for you than the entry, mark it. Count the marks against the number of positions that went into loss at all, so the fraction has the right denominator.

Then two numbers that are only addition. For each marked position, what was the total quantity you ended up holding, against the quantity you opened with? And what was the rupee result on those positions, against the rupee result on the ones you did not add to? Keep the two groups separate and write how many positions are in each next to its total, because two totals over different numbers of positions are not comparable.