A Step by Step for everyone: Cut your Loses short

Discussion in 'Trading' started by angelnish, Sep 24, 2012.

  1. I've been reading a lot of posts and some are too large or too numerical for me to read it, i guess most newbies do the same as me: skip the post. And hence i've decided to create a series of step by step threads starting with what i consider the most important thing in trading: To Limit your Loses. So I ask some help to explain and extend this issue and please be creative and try to avoid the same old stuff, i mean you must say it again but i ask you to explain your own experience.

    Well this is sort of what I do to limit loses:

    For start I am a mix of day and swing trader and for now i trade with Cable (GBPUSD for those who doesn't know) in 1hr charts. If posible i risk less than 1% and I've defined my SL level at 25 pips and TP upto 75 pips. Let's start with big picture and a little of sel experience: Skiping all the initial pain and the strategy to strategy stage i was making upto three trades per day with the scheeme mentioned above. Then I've noticed the loses were to painful and so i've reduced it to one trade per day and it was painful too. So after it I scaled it down to thre loses per week maximum and it was painful too. Dam! what i should do now? Ok, I changed to one loss per week an voialá, the best days of my life and then decided to stop trading once the monthly balance was reaching green numbers and start over next month. Well this adaptation took months to do because going from overtrading to just trading is not an easy thing to do, is just like smoking 1 pack of cigarrettes per day and then just smoking 1 per week. Analysing previous montly sheets I noticed something: the more I traded the more I was losing and the last months with fewer trades i was losing less and finally ended up with green numbers. But just trading less is not enough, I do something more, whenever I can I close orders manually before the price hits the SL, I mean, for me SL is a catastrophic exit when things goes out of control. My trading is based on the first minutes after opening the order, if price does not rise just a little in the next five minutes I just close the order and I try again next week.

    So what you guys do for limiting loses?