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When to Stop Trading, Money/Risk Management Rules


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When to Stop Trading, Money/Risk Management Rules

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  #1 (permalink)
Houston
 
 
Posts: 170 since Dec 2016
Thanks: 91 given, 89 received

Hello All ,

I need some help with Risk Management and knowing when to stop trading for the day and week.

I would like to getting better at risk management rules and knowing when to stop trading and prevent overtrading leading to blown account and revenge trading.

I know everywhere states to not risk more than 1-3% of your account balance per day, per trade. I am choosing 3%.

My account balance is $5000 and I am day trading the ES Micros

My Daily Stop Trading Rules:

1. After 3 losses in roll, stop trading for the day.
2. After 2 mistakes trades.
3. After 2-4 trades.
4. After daily PnL High drop by 50%.
5. 11 am central


My Weekly Stop Trading Rules:
1. After 6 losses in roll, stop trading for the week, and re-evaluate what the problem is.
2. If account balance drops by 20%.

Money/Risk Management:

1. If account balance drops by 10%, scale down to 2% risk of capital per trade.
2. If account balance drops by 50% stop trading and re-evaluate myself or trading strategy.


Questions/Recommendations:
1. What percent of account balance must be loss to stop trading for the day/week?
2. May I please request a review of my risk management rules.

Hopefully others are setting rules for themselves as well.

Thank you kindly.

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  #2 (permalink)
Cape Town South Africa
 
 
Posts: 1 since Aug 2019
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The daily stop trading rules make good sense for a discretionary trader.

Interestingly, if this was an automated trading system all those rules would be too complicated and the system would miss out on some good trades.

$5000 is quite a small account, have you done some sort of backtesting to see if that account size would be feasible for you?

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  #3 (permalink)
Legendary 4LeafClover
Mumbai, India
 
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Platform: Own Customized
Trading: Crude, NIFTY, BANKNIFTY
 
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I also limit myself for daily number of trades, reason for that is to avoid over-trading.

I wont dive into specifics of your plan as its kind of personal thing, but mentioning that just to bring up which I didn't see in your post.

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Everyone has a plan until they get smacked in the mouth. - Mike Tyson
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  #4 (permalink)
Las Cruces, NM
 
Experience: Advanced
Platform: Tradestation, MC, NT
Broker: TradeStation, IB
Trading: Liquid futures contracts
 
Posts: 55 since Sep 2009
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goodoboy View Post
Hello All ,

I need some help with Risk Management and knowing when to stop trading for the day and week.

I would like to getting better at risk management rules and knowing when to stop trading and prevent overtrading leading to blown account and revenge trading.

I know everywhere states to not risk more than 1-3% of your account balance per day, per trade. I am choosing 3%.

My account balance is $5000 and I am day trading the ES Micros

My Daily Stop Trading Rules:

1. After 3 losses in roll, stop trading for the day.
2. After 2 mistakes trades.
3. After 2-4 trades.
4. After daily PnL High drop by 50%.
5. 11 am central


My Weekly Stop Trading Rules:
1. After 6 losses in roll, stop trading for the week, and re-evaluate what the problem is.
2. If account balance drops by 20%.

Money/Risk Management:

1. If account balance drops by 10%, scale down to 2% risk of capital per trade.
2. If account balance drops by 50% stop trading and re-evaluate myself or trading strategy.


Questions/Recommendations:
1. What percent of account balance must be loss to stop trading for the day/week?
2. May I please request a review of my risk management rules.

Hopefully others are setting rules for themselves as well.

Thank you kindly.

Except you are extremely self-disciplined, you need another person to enforce the rules you set. A trading partner would be good.

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  #5 (permalink)
tampa florida
 
 
Posts: 63 since Sep 2020

based on what you wrote you already in trouble an should just paper trade or demo trade until you get consistently profitable and no longer need to ask a public board these kinds of questions

you rules make zero sense to me because no one knows but you what you are good at in trading. do you possess any skill in reading the mkt in executing your profitable plans?

no one knows your financial situation so the ONLY CORRECT answer is.

TRADE DEMO until you are profitable and have statistics on your trading and you can then use your own P and L to figure out when you should and should not be trading.

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  #6 (permalink)
Houston
 
 
Posts: 170 since Dec 2016
Thanks: 91 given, 89 received


Algie View Post
The daily stop trading rules make good sense for a discretionary trader.

Interestingly, if this was an automated trading system all those rules would be too complicated and the system would miss out on some good trades.

$5000 is quite a small account, have you done some sort of backtesting to see if that account size would be feasible for you?

Hello Algie,

Thank you so much for the response.

Yes, the $5000 is for the micro ES at $5 per point. I am only risking 3% of my account per trade. That is enough.

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  #7 (permalink)
Houston
 
 
Posts: 170 since Dec 2016
Thanks: 91 given, 89 received


LastDino View Post
I also limit myself for daily number of trades, reason for that is to avoid over-trading.

I wont dive into specifics of your plan as its kind of personal thing, but mentioning that just to bring up which I didn't see in your post.

Hello LastDino,

I do limit myself to 1-4 trades per day. And I have a cut off time of 10am central.

2 -3 losses in a roll I stop trading.

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  #8 (permalink)
Legendary 4LeafClover
Mumbai, India
 
Experience: Beginner
Platform: Own Customized
Trading: Crude, NIFTY, BANKNIFTY
 
LastDino's Avatar
 
Posts: 577 since Jan 2019
Thanks: 1,323 given, 1,371 received


goodoboy View Post
Hello LastDino,

I do limit myself to 1-4 trades per day. And I have a cut off time of 10am central.

2 -3 losses in a roll I stop trading.

That's a good thing, your plan looks solid. Assuming you can implement it you should be prepared for the battle

___________________________________________________________
Everyone has a plan until they get smacked in the mouth. - Mike Tyson
___________________________________________________________
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  #9 (permalink)
Houston
 
 
Posts: 170 since Dec 2016
Thanks: 91 given, 89 received


LastDino View Post
That's a good thing, your plan looks solid. Assuming you can implement it you should be prepared for the battle

Thank you LastDino,

One problem/challenging I am having is this:

If my first trade of the day is a win, of say 6 pts on ES, I hesitate on taking the next trade, I guess in fear of a loss and giving it back.

Perhaps I need to decide on a daily profit target for myself.

Maybe I will start a new thread with this issue.

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  #10 (permalink)
Houston
 
 
Posts: 170 since Dec 2016
Thanks: 91 given, 89 received



jamrock View Post
based on what you wrote you already in trouble an should just paper trade or demo trade until you get consistently profitable and no longer need to ask a public board these kinds of questions

you rules make zero sense to me because no one knows but you what you are good at in trading. do you possess any skill in reading the mkt in executing your profitable plans?

no one knows your financial situation so the ONLY CORRECT answer is.

TRADE DEMO until you are profitable and have statistics on your trading and you can then use your own P and L to figure out when you should and should not be trading.

Morning jamrock.

Thanks for the input. That makes sense too.

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