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What % is your daily loss limit?


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What % is your daily loss limit?

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  #31 (permalink)
Singapore
 
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Sure Bob, will do that.
bobwest View Post
Not a problem. This is what threads do, and sometimes wandering around a little gets them to interesting places, which it did.





But if you're going to update the thread with trade reports, it's much better to start a trade journal where you can address them in detail and where they will be on-topic. Discussion of individual trades should be done there.

Bob.

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  #32 (permalink)
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Hi guys, I will start a new thread to discuss about trailing and fixed stop separately and probably a new thread on journal after implementing some stop principles

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  #33 (permalink)
Langley
 
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bobwest View Post
This has become a good discussion of stop strategy, especially trailing vs. fixed stops, but also has gotten a little off-topic from the original question, which was about your daily loss limit percent.

I do like the trailing/fixed stop question though, so let me add a little more to it, before trying to steer things back more in the original direction.

It has been noted that trailing stops work if you are in a large trend, because it's large, basically -- you want to just ride it and not get out "early." It's also been noted that trailing stops are terrible in mean reversion situations, and that a fixed target will do better there.

I don't think anyone has pointed out explicitly yet that markets tend to be in mean reversion (ranging) mode much of the time, although it's part of what a lot of people have said. The question is therefore whether you can detect a trending vs. a non-trending situation, or adapt your trading to the mode the market is operating in. Taking a profit quickly will work much better if the market moves in shorter runs and then falls back. Holding during a trend with a trailing stop works well, but only if it is a trend, and if you don't use your trailing stop during short-up-and-down moves where you get whipsawed to death.

So all you have to do is know the future, right? Hard to do.

I think this question is a larger one than what this thread started out with: rather than just "what is your percent loss number," now it's "how to respond to current market conditions to manage loss." But that's the larger context for any loss-limiting or risk-limiting discussion.

Maybe we can move the conversation back in the direction of the original topic anyway, because it's a good question that traders need to have some clarity on.

Perhaps something explicitly related to how loss parameters have worked out over time, or under different conditions, or something else that brings risk criteria back in....

Not trying to stifle this discussion, though, just reminding people of the topic.

Bob.

You couldn't be more right. I have a habit of rambling.

No I don't use a daily stop... but I probably should.

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  #34 (permalink)
Langley
 
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eilanzier View Post
I actually did 2 trade today intending to adopt either win or lose mentality.

Today I did 1 trade which hit 87 ticks profit but I did not move my stop, end up losing the trade, felt a little upset though.

2nd trade
I entered a trade without fulfilling my rule it is quite far away from where I intended to enter. I didn't have a chance to get out of thr trade and got a straight loss.

3rd trade (paper)
After reading your response
I entered the place where I originally intended to enter on second trade and move my stop loss based on price level (I also have atr set up for moving stop loss though hardly use but might take a look in future)

Anyway aside from moving to the price level, I never move stop loss further, end up earning 143 ticks peofit. My target is usually a previous zone

I think I felt rather devastated when I see a trade which I couldn't have lost turn into a loser. But in order to achieve consistency, better way is not to move my stop at all. Any how I will update the thread regularly.

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Sorry Bob ;P last one.

Eilanzer thats GREAT!

Its just an idea but if you keep everything else the same and test that one variable ya never know. Keep up the good work

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  #35 (permalink)
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Thanks man, OK back to the original topic.

Assuming if you are running a small account of maybe 4k, trading a product which is 10 ticks per trade.

Running 1% gives you 4 ticks a trade which is essentially almost inconsequential, how do you guys manage this on a small account?

Personally there are a few option I can think of

1. Find another product (increase micro)
2. Increase stop loss.

What you guys think?

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  #36 (permalink)
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eilanzier View Post
Thanks man, OK back to the original topic.

Assuming if you are running a small account of maybe 4k, trading a product which is 10 ticks per trade.

Running 1% gives you 4 ticks a trade which is essentially almost inconsequential, how do you guys manage this on a small account?

Personally there are a few option I can think of

1. Find another product (increase micro)
2. Increase stop loss.

What you guys think?

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Good points. Here's another:

3. Increase account size.

This can be an awkward thing to discuss, because a lot of traders are essentially trading on a shoestring -- which is not a criticism, just a recognition of reality. You've got the money you've got, after all. But a too-small account can seriously limit you, because you won't have that much leeway to allow for losses.

The micros have the effect of making the impact of losses, that is, risk, much less a factor, which is a good thing. So effectively speaking, it makes everyone's account larger, in a risk control sense anyway.

Bob.

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  #37 (permalink)
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% of total loss on capital deployed? I really don't like to have such a measure, though I do keep rule which states if 2 trade SL's are gone its best to shut down terminal. Previously I used to take only 2 trades per session, now that I'm getting more comfortable I'm slowly increasing qty and number of trades.

It's difficult to mentally assign number to something which is calculated technically based on ATR/ADR everyday, even more so if you trade different assets and market conditions are varying as much as they have been lately. Generally for me 2 trade SL means 1-2% of the total capital deployed. It changes depending on how volatile the day is.

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  #38 (permalink)
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Ok back on topic, sorry about that, my bad! I do have quite a few opinions on this topic though...

I don't like to use % and account size as a metric for daily stop losses. I consider other factors in that I would much rather prefer to keep as small an amount of equity in my trading account as possible. That doesn't mean I don't have more capital to deploy, it's just my fail safe. Since trading is so emotional and I know we all go or have gone "on tilt", having the broker margin you out on a smaller account can keep you in the game.

Ok so some real world examples...if I had a 5k account i would consider a daily loss of $500 to be the point I should complete stop trading for the day, but i like to give my self some leeway. So in percentage terms, 10% sounds rather large for a day trading scalping account but in terms of available capital, including what you keep available outside the account, would be much lower.

I also wish it was possible to set limits directly in brokerage accounts such that once you hit some configurable limit, % or $, you get locked out for a period of time. I've not seen that offered anyway but if it is I'd be interested to deploy that concept. These limits would be much tighter than broker implied margin limits.

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  #39 (permalink)
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RT777 View Post
I also wish it was possible to set limits directly in brokerage accounts such that once you hit some configurable limit, % or $, you get locked out for a period of time. I've not seen that offered anyway but if it is I'd be interested to deploy that concept. These limits would be much tighter than broker implied margin limits.

I do think that's available with some brokers, probably many. It seems like a natural thing to offer.

@Scalpingtrader, don't you have this with NinjaTrader Brokerage (or one of their FCM's)? Or is my memory just wrong?

Bob.

---------------

Edit: Yeah, here we are. This link will take you to a post on the topic. I expect there are other brokers with the same:



----------------

Edit #2: to be clear, @Scalpingtrader is talking about broker-side limits. I have software-side limits set on my trading platform, which is Sierra Chart, and I'm sure this is also found on others.

Arguably, broker-side limits might be better since it's more work for the trader to change them and that might impose some additional discipline; with platform-side limits you just make a few clicks. But the value is that the limits are imposed and will stop you, so you do have to actually decide to override them. You will always have the ability to change them no matter what, but if a trader needs someone to actually handcuff him, well, that's a problem too, isn't it?

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  #40 (permalink)
Nepean
 
 
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I think for me it would be a 3% of my account. I am completely a newbie so have not disciplined myself to follow this day loss limit... today was my second day live trading and got to experience how volatile the market is, I saw a drop of 9 ticks in basically a second! yesterday I was on top of thew world with my + day and now I am back underground...will keep learning

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