Trading loss limit at 15%

In a conversation with Tyro Trader, he observed how our respective equity lines are exhibiting signs of a double-top or a potential upside break-out. We would both like the latter.

Personally, I feel that my desire to escape this trading range has been very strong and – cautious about my own short-comings – I realise this ‘desire’ has the potential to be turn in to a destructive ‘need’.  I don’t feel like that at present, but I’m aware it could happen.

The last time I was around this level in my equity, I experienced a drawdown of 17%.4 in a single week. This time around, I know a ‘steady as she goes’ approach is best, but I also realise that I could get lost in the heat of the moment and end up chasing losses, taking too much risk, etc. It’s so easy to slip up in this game. So, to help prevent against a calamitous trading performance I have reduced the funds in my trading account to just £1800. If I can hold to my pledge not to top up my account in the month, this means my potential losses for April should be capped at 15%. I am sacrificing some potential upside by trading with such little equity, but these steps should help to enforce a more disciplined trading approach.

Wishing everyone a solid performance in April.

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4 responses to “Trading loss limit at 15%

  1. i agree with tyro — u are one of the most insightful and self-aware bloggers out there

  2. Thanks for the compliments John – I’m sure having the wind knocked out of one’s sails would does wonders for anyone’s humility and self-awareness.

  3. Hi Caravaggio,
    Do I detect a hint of “trading not to lose” mentality (as opposed to “trading to win”) creeping in here ? How would you press your winners if your account size is too small ?

  4. Hi Phileo. It’s really more of a emergency measure. Even though my performance of late has been okay, I’m just not as strong willed and disciplined as other traders, and I know that if the evil behavioural gremlins return I could inflict serious damage to my account. To put it another way, when I am in the act of a trade I know I am still not as rational as I am before the trade, or after it. I feel more susceptible at that point. I don’t know if this is true for everyone, but it’s a feeling I have been trying to tame since I started this blog.

    Also, because I am in the world of high-leverage forex trading, I have only sacrificed a small portion of my potential upside, and I can pretty much keep trading as usual. I just can’t keep doubling up, which I think, on balance, is a good thing.

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