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I read a lot about how people don’t recommend risking more than 1% of their account per trade, but what is your total daily loss limit?
If you follow the 1% rule, how many losing trades in a row until you call it a day? Would 2-3 losing trades in a row (2-3% of your account if risking 1%) be enough? What are your daily risk parameters?
I know a lot of people use these daily drawdown cutoffs, but unless you're principally a discretionary trader I'm not convinced it makes too much sense. If you're trading systematically then it always makes sense to trade every signal in order to ensure that your out of sample performance mirrors your backtesting as far as market conditions allow.
If you trade intraday, and you think it is a good idea to have a maximum drawdown that triggers a cessation in trading, why start (and end) this based upon what may be a somewhat arbitrary time (the open).
Could it not make more sense to have trading pause in response to unfavourable market conditions (such as high/low volatility), and resume when favourable conditions ensue?
Having said all of the above, from a purely psychological respect, and especially for discretionary daytraders, I can see where a daily cutoff might add value.
Hi guys, I have the same question, what would be a justifiable amount of stop. 1% rule? In the event of a small account, 1% almost get gets you knock out of your position all the time.
