Im going to try and keep to a £300GBP (about $500) per day loss limit. This maybe increased or decreased in the future, but it seems to be a comfortable level to start off with. I have never really set a formal daily risk limit before and that is the point of this journal. The idea is if i am down £300 or more, then i close any/all open positions and stop trading for the day. No more new trades, regardless of how confident i might be on any other trade. Ideally a trader walks away from their screens to avoid temptation. The only problem for me is that i have automated systems i run on another trading account (daily risk limits are built into automated trading systems). I need to monitor these systems and that can mean knowing where the markets are trading. So i cant aways walk away and i can get very tempted to trade again. Lets see how the markets test my discipline!!
Day 1. +£151. I never got to test my daily stop discipline today. Had 2 trades one profitable and one i eventually scratched (would have been a nice winner had i kept it). I had unrealised losses of about £80 on the first trade, but it went in my favour eventually. So no where near £300 in losses today.
Been up late (or perhaps i should say early) trading the FX.. its 4am UK time. Booked a +£170, profitable trade. with little heat on the trade. Time to get some sleep. Will leave you with this little bit of wisdom from Alpesh Patel: The Disciplined Trader This is the ideal type of trader. You take profits and losses with ease. You focus on your system and follow it with discipline. Trading is usually a relaxed activity. You appreciate a loss does not make you a loser.
no idea as to your FCM/Clearing arrangement, but you should be able to create a ledger/sub for the ATS and another for your MTS... and just setup the MTS with the 500 limit for the day... even if you see where the markets are and you already lost the 500, it will not let you open another trade.. (then again, that depends on your FCM but most of them should, so just ask...)
^My broker does not provide this feature, so i have to enforce my own daily risk limit. Day 2: +£555. P/L since start of journal: +£706 Another good day. Started the day taking small risks and increased size on my final trade. Had 4 winners today, one small loser, and a few scratch trades. I expect one or two bad trading days per week, when my discipline is going to be tested. Thats the day i want to lose £300 or less. If i lose discipline and go on 'tilt' i could lose >£1000 in one day. Which is what i am trying to avoid.
Day 3: -£139 3 trades all losers. First trade was one taken out of boredom had no right to really take it. Cost me £30. Second and third trades were good ones. I got stopped out on both only to watch the market quickly reverse and then go on to hit my profit taking exits. This happens often in trading. And you cant get upset by it. Cant let it ruin your day or your discipline.