Does anyone know which brokers allow a trader to implement a Daily Loss Limit?
Im using NinjaTrader and wish to have this in place as a failsafe in case I lose my internet connection whilst in a trade ... and/or to prevent me trading stupid.
Platform: Sierra Charts, Investor RT, Ninja Trader
Favorite Futures: NQ
Posts: 527 since Sep 2009
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The ones that I know about are brokers that use TransAct or OpenECry. The OEC platform allows you to set the limit locally; the TransAct folks require you to tell the broker and he sets it for you.
My focus is on:
1. Avoid the opening chop.
2. Honor stops
3. Ensure reward > risk on all trades
He isn't talking about a broker-side emergency stop based on broker risk, which I think might be what you are talking about. He wants to implement his own "emergency stop" in which he tells the broker "Don't let me lose more than $xxxx per day" and at which point trades are closed and he can't open new positions.
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Mike is correct, what we're asking about is not the margin-limit the broker imposes but a daily loss limit as Mike described. So far the only broker I know who has one is Infinity, I've asked Velocity and Optimus and they both will not implement a daily loss limit for their customers.
Seek freedom and become captive of your desires. Seek discipline and find your liberty. - Frank Herbert
That's my point. Whether or not the broker will allow you to adjust the daily loss limit/failsafe is the operable question he's asking.
My point is that he's probably trading with a failsafe in place and doesn't even realize as virtually ALL brokers feature a daily loss limit. Most traders aren't aware of it, because it's usually a pretty hefty amount (and rarely gets triggered).
You only discover this if you either A) read the fine print in all the disclaimers and agreements you sign when you apply for an account or B) Blow out an account and end up calling the tradedesk when they freeze you out or C) below
The next logical progression (after calling the broker) is...
A) Ask if your broker has a daily loss failsafe in place.
B) If so, determine if that's acceptible to you
C) If not, ask if the broker is willing to modify your daily loss limit to suit your needs
D) If the broker is unwilling, try to find one that is willing.
It's premature and inefficient to skip right to D) when he may find joy just by calling his own broker.
This is a healthy exercise, just to ensure/double check that your broker's daily failsafe is GREATER than your drawdown tolerance.
I've heard horror stories of traders that have been "frozen" during a drawdown because they violated the broker's daily loss limit, and instead of entering what would have been a profitable trade during equity recovery period, they're on the phone to the broker, trying to figure out why their account has been locked out.
Any time you increase your position size, it's a good idea to call and confirm that the broker has increased your daily loss limit.
The last thing you want to have happen, is to take a $5k account up to $30k, increasing your positionsize along the way, only to finally hit a losing trade that violates the original daily loss limit (that the broker did not update to reflect the new account equity).
I.e. (if you're initial daily loss limit was $1500 on a $5k account, and now you're trading 4 or 5 cars, and you take a 40 tick loss, you might get frozen if the loss limit hasn't been increased). This is generally the way that traders discover they have a daily loss limit. Hopefully, it doesn't preclude you from missing a profitable trade/entry.
"A dumb man never learns. A smart man learns from his own failure and success. But a wise man learns from the failure and success of others."