Your response lacks conviction. Take a good look at your past samples/trades and testing/execution capability.
Have you written down how much this particular mistake has cost you over your career? I'll give you a real example. If the guy in the picture below had set a daily stop loss at -5k, he would have saved close to $23k over the course of 4 trading months which would represent an 85% increase in his returns. Sometimes only visualizing, one can learn.
As much as I love this example, it is a bit tricky because there could be some days that ended up being net positive but could have been at -5k for the day prior to turning it around. Its just like doing stats on individual trades. Its easy to see that if you set your stop just 1 tick smaller, you could save 100 ticks for each trade that loses after 100 losing trades, but this might very well also kill some trades that end up being profitable and turned around 1 tick from getting stopped out. Once that stop is shortened by 1 tick, you save on each loss, but you also more than likely reduce the number of winners.
I am glad you brought this up Gotcha. I knew someone would. It is tricky, but most times you just keep digging the hole deeper. Trading is all about following rules strictly and in this case capital preservation is mandatory. That's the point I was trying to make.
Agreed, and yet, there is another point. Just because you lose 5 trades in a row, does it mean you stop following your system that keeps saying trades should be put on? Suppose you have a rule that says you stop after you're down $500. It would be a sensible rule if your average winning day is about $500 as well. But what happens when a really good setup comes along? Do you skip it cause you're already down at your max? If you do, you're actually breaking the whole cycle of your distribution of wins and losses. You could literally be stopping to trade after a string of losses just as a string of winners would come. From what I've seen, the best traders don't have a max daily loss, but they take each trade without emotion if it sets up. Along with this is of course experience that if the first few trades don't work, they perhaps switch gears from a trending day to ranging day, but they still always take the trade if it sets up. The max daily loss thing is really just a crutch put in to prevent you from doing something dumb. But if you're experienced enough and disciplined enough to not do anything dumb, then its really just trade after trade after trade.
What I used to do when I manually day traded was to have a daily stop loss that if reached, I allowed myself to take another trade. If it was a loser, I'd stop, else continue until either I made money back or hit the stop again. If you trade mechanically and your system is losing for that day after a reasonable number of trades, your system is not working well for the day and there is no point in continuing because like I said, chances are you will continue to bleed. I am fine breaking the cycle of distribution of wins and losses for a day. What I am not fine is losing 3x my daily loss and work 10 times as hard to make it back. Sometimes you are in a bad vibe and anything you touch will go sour. These are the days that if you are not disciplined, you lose a month's pay.
a very simple cognitive error here. No he wouldn't have increased his returns by 85% if he kept losses to $5k per day and here is why. We do not know how much risk he took on every single one of those up days. It is likely he would have breached the $5k per day risk limit by trading out of trouble on some of those days to finish the day positive. From that data the returns would not increase by 85%, for all we know it could be negative.
A trading burnout, similar to many here, tells his story -- But the one thing that was never communicated to me, and I don’t believe I’ve ever seen written about or rarely talked about, is what happens to the Trader (like me) who’s been at this business for most of his professional life, and then finds himself out of money and needing to find some income — any income — to support his family? I’ll tell you what happens: You discover that you have a resume that makes a dry desert bed appear fertile. You discover that you have little or no transferrable skills that “check the right boxes” for recruiters and machines that scan your online job application. You find that you’ve spent little time “building your network” because you’ve been solely focused on building your trading account because that was what was supposed to take care of you — until it doesn’t anymore. And then you find yourself seemingly alone, without options, without savings, and desperate. That’s where I find myself today. Feeling inadequate. Feeling lost. Scared. Anxious. Depressed. In debt. Unhealthy. Unloved. Afraid of losing my family...