Welcome to NexusFi: the best trading community on the planet, with over 150,000 members Sign Up Now for Free
Genuine reviews from real traders, not fake reviews from stealth vendors
Quality education from leading professional traders
We are a friendly, helpful, and positive community
We do not tolerate rude behavior, trolling, or vendors advertising in posts
We are here to help, just let us know what you need
You'll need to register in order to view the content of the threads and start contributing to our community. It's free for basic access, or support us by becoming an Elite Member -- see if you qualify for a discount below.
-- Big Mike, Site Administrator
(If you already have an account, login at the top of the page)
For those of you who utilize a daily loss limit, how did you about calculating it?
I know the merits of a daily loss limit have been discussed in the past, but I haven't seen much in regard to how traders go about deciding exactly what that limit should be.
Can you help answer these questions from other members on NexusFi?
I more or less copied it from what TopStepTrader allows and just rounded it down a little: I never expose more than 1% to risk in full position-sizing, and usually less - and I stop for the day if I've lost two full trades or the equivalent, on balance (so 2%). I'll stop for the week if I'm down 4%, but have so far escaped that fate.
I have a strange system which includes many close-to-breakeven trades (they actually make very small profits, net of dealing costs), and it's all designed to prioritize risk-management rather than profit-maximization. Although I don't hit that many runners producing big profits, losing two full trades is also thankfully pretty rare. It's not "play-money" or "hobby-money", for me: though I could always last a few months, if I needed to, in the long run I pretty much need some of the month's trading income, to live on and build my account.
Which is exactly why traders whom have $5,000 in their trading account for futures will never survive.
--------------------------------------------------------
- Trade what you see. Invest in what you believe -
--------------------------------------------------------
It makes sense in principle: it's a little bit arbitrary in practice, perhaps, because hitting it on a Tuesday (say) would be very different in outcome from hitting it on a Friday, but I suppose one could substitute something like a "4-or-5-days-off limit" instead.
I think it depends on your Edge. If your trading plan/system calls for taking every setup then the one you miss because you just took 2 losses in a row might be the one that would have made up for those losses and made you profitable for the day.
When I day traded, which I don’t now, I had a 25% drawdown rule where I would stop trading and re-evaluate my system. I had confidence in my edge that if I took every trade which presented itself I would be profitable overall. With a planned 35 to 40% win rate I had to be able to take several losses in a row in order to catch the eventual winners.
"The days when I keep my gratitude higher than my expectations, I have really good days" RW Hubbard
I think JonnyBoy makes an interesting point about the 5,000 in one's trading account. I guess one needs to discriminate between what you have in your trading account and your trading capital as a whole.
Especially when starting, I found that having a limited amount of money in my trading accoung helped psychologically by not making me reckless. There is the mental barrier of having to deal with margin calls if the account goes to close to margin.
So one could risk 1% of their trading capital but have only (say) 10% of their trading capital in their account. At least at the beginning.
