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Daily max loss


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Daily max loss

  #1 (permalink)
Rome Italy
 
 
Posts: 20 since Apr 2019
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a


Last edited by Incognito; May 19th, 2020 at 05:08 PM.
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  #3 (permalink)
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Incognito View Post
Should your max loss be smaller than your average winner? For example if you aim for 200 - 300 in a day. Would a 400 daily max loss be too big?

Yes, I don't think anyone would survive that kind of losers for period of time. On odd bad day might happen but if this happens 3-4 times I would assume there is need for taking a break.

I generally go by number of trades though. And I calculate SL based on ATR, generally it is 10 to 14% of ATR depending on volatility expected for the day. If at any given time, I get two SL down I leave terminal alone. Note that I take 2-3 trades only and mostly focus on scoring just RR of 1:2, 1:3 or a very rare day of 1:4.

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  #4 (permalink)
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Risk managment

No body can answer for your question correct. Because correct way will be look trading statistic for 1-2 years and only after you can understand how much day you lose or win. Which average win/loss day and etc. Only after that you can chose correct rules for your Risk management. If you only start in trading. Chose 1:1 or 1:1,5 ratio.

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  #5 (permalink)
Legendary Market Wizard
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If your strategy needs a max daily loss then develop a new strategy.
My max loss over the past year was most certainly larger than my average winner (by over $300).

My largest loss over the past year was $745 per contract. My average loss was $260. Now if I decided I didn't want to risk $745 again and implemented a max loss of say $400 ($140 over my average loss, $35 less than my average winner) my other stats would significantly change as well. R/R ,winning %, max win (potentially), average win, average loss, etc. and therefore expectancy would change and no doubt for the worse.

I don't use arbitrary ratios for stop/profit targets.


Last edited by Massive l; November 3rd, 2019 at 11:31 AM.
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  #6 (permalink)
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Massive l View Post
If your strategy needs a max daily loss then develop a new strategy.
My max loss over the past year was most certainly larger than my average winner (by over $300).

My largest loss over the past year was $745 per contract. My average loss was $260. Now if I decided I didn't want to risk $745 again and implemented a max loss of say $400 ($140 over my average loss, $35 less than my average winner) my other stats would significantly change as well. R/R ,winning %, max win (potentially), average win, average loss, etc. and therefore expectancy would change and no doubt for the worse.

I don't use arbitrary ratios for stop/profit targets.

I only trade 1-4 trades a day though with bigger stops between 10-20 ticks per trade. Therefore, if I took 2 trades in which I risked 15 ticks each and both happened to be losers....I will be left with another 2 shots which might not be worth the potential risk of increasing my red day of $300 since $300 is generally my daily goal.

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  #7 (permalink)
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as mentioned by @jonnytrade , we need to see the entire picture. You're leaving out other key data to make an informed decision.

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  #8 (permalink)
Rome Italy
 
 
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jonnytrade View Post
No body can answer for your question correct. Because correct way will be look trading statistic for 1-2 years and only after you can understand how much day you lose or win. Which average win/loss day and etc. Only after that you can chose correct rules for your Risk management. If you only start in trading. Chose 1:1 or 1:1,5 ratio.

Good point. With 1:1 / 1:5 .. do you mean that if you make an avg of 300 in a day you should stop if you lose 300 in a day?

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  #9 (permalink)
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Incognito View Post
Good point. With 1:1 / 1:5 .. do you mean that if you make an avg of 300 in a day you should stop if you lose 300 in a day?

He's saying that's a good starting point but it's not how you're going to run your business if you want to do this for a living and/or the long haul.

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  #10 (permalink)
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Incognito View Post
Should your max loss be smaller than your average winner? For example if you aim for 200 - 300 in a day. Would a 400 daily max loss be too big?

Your max loss should always be smaller than your average winner.

Aim for 2.5:1 on all your trades i.e. for every Euro you lose on a trade, make sure you make 2.5 Euros on a winning trade.

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