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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
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.
When one door closes, another opens.
-- Cervantes, Don Quixote
% 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.
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.
Ninjatrader brokerage allows daily loss limit, as well asspecifying which instruments and quantities you want to trade.
But you got to go with their software then, which is something to consider. (I used it ever since I moved to futures but since …
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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?
When one door closes, another opens.
-- Cervantes, Don Quixote
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