Some traders impose a maximum daily loss, and I suppose there is someone out there who quits while he's ahead, but I'm thinking a better way to go is to have a set maximum number of trades per day (or week if you swing) Every trader is different, for me, it seems 7 is about right. So, if the first 5 are losers and I hit max daily loss, it would be better just to go on as always and make the final 2 trades. Same with a big winner right off the bat. What good does it do you long term to take the rest of the day off? But primarily, I am thinking in terms of commission cost. With a set number of trades each day, if your size is constant your daily commission will already be factored in from the start. I understand the psychological reasons for a maximum daily loss, but for me I think my mental health would be more stable if I have at least one other stable factor in my trading. This way, I know from the start I am going to make 7 trades (if the opportunity presents itself) and no more, and I know what my maximum commission cost for the day will be. Or maybe this is just another way my mind continually tries to screw up my natural intuition. Maybe I don't need any rules.
maybe you dont need to trade anyway ? trading is like being inside a mirror cabinet....how could YOU think, that you will find your way trough it...
I use a daily stop loss and gain....as well as monthly.. It helps me not to revenge trade and keeps me from giving any money back once I reach my goal...I increase them as my percentage hit ratio increases... I find overtrading and revenge trading to be my two worst enemies...Good thing is we can control ourselves from doing this. If you hit your daily stop loss with 5 trades why would you continue to trade?? u are breaking a rule IMO (your daily stop loss)....Do you allow yourself to blow a stop when in a position?? just my 2 cents
Thanks ElCubana, Now I remember why I need rules. Because after a losing streak, my natural intuition is going to be in no shape to give me sound advice. So I better have some rules that I made when I was of sound mind and body and follow them. What I failed to realize is, I am fiddling around with my style, and I cut my loss per trade in half, but I didn't double my size. So I need to work on that one. I was taking 2% risk per trade, so that means after 3 losers in a row I was down over 5% and that's enough for the day. But now it is less than 1 % per trade, so what's the point in stopping after 5 losers in a row? It is hard to hit 7 out of 7 anything, winners or losers. But having said all that, I am having a hard time reading the market today. I already have a nice profit, so the heck with statistics. Maybe I'll just go back and watch for a while.
If after 5 losing trades you have not hit your daily stop loss then by all means put in those two extra trades and try working your way out....I was refering to hitting your daily stop loss after only 5 trades ...the reason you have the daily stop is to stop yourself when it gets triggered....that is basically the most you are willing to lose that day period..... try stoping when you hit your daily stop gain, that is even harder, you want to continue pushing, these rules have worked well for me, just trying to help a nigga out.... I wish you well...
Here is a post I made a few days ago about this topic : http://www.elitetrader.com/vb/showthread.php?s=&postid=112493#post112493 Hope it helps.
You are limiting your upside potential. Maybe you need to evaluate your trading strategy. If you have a strategy that has a high probability rate, the more trades you place, the more successful you will be. We could get into probabilities and percentages but understand that you should spend more time on developing a strategy that has a good probability, even 51% is an incredible edge. Better than that ..... you should go hog wild!.
JWKirkland, At some point at the end of a trader's life, you would be able to take every trade they ever made and come up with a net profit or lose level for each trade averaged out over the course of their trading career. That number better pay for commissions and still remain positive. aphie
AGREED. Your trading strategy HAS to include the costs of doing business or it is a not a realistic strategy. Nobody I know trades for free.
x-or, That's the post I was looking for. I did a search on max daily loss and some things and I couldn't find it. I couldn't remember if it was something I read recently or a long time ago. You never know about these things. Sometimes something seems to make sense, but anything that makes trading easier always costs me money. That's why it's helpful to read here when others have tested theories. ElCubana also makes a good point in saying, if you aren't going to blow your stops on your trades, why do it on the day? Somewhere in my trading rules to live by it says, quit when you have lost more money in a day than you use to make in a week.