The 6% Monthly Loss Limit Rule

Well clearly as were both still trading… I guess weve got the psychology part covered. :stuck_out_tongue:

Sounds pretty arbitrary to me. If you have a repeatable edge, and are exeperienced enough to not let a loss make you do stupid things on your next trade (s) , theres not much sense to it.

Sounds like it falls into, “kill a losing streak,” advice. Which is good advice if you are inexperienced, as a string of losses in a row can make a new trader react badly and stop trading according to their plan/edge.

Stopping trading at x loss for the month and starting over can let the mind let go of the loss and reset to a fresh outlook.

There may be other factors they consider.

Personally, if I hit two or three negative trades in a row I will bug out for the day. Clearly my heads up my A**. :smiley:

I wouldnt go with a 3 month break though? Sounds counter productive to me. :confused: That long a break is bound to make you rusty and is counter productive in and of itself.

Do you mean 2X and 4X leverage per trade or total? For example, the system I am demo trading now typically has me at .5-1X leverage per trade but I trade as many pairs as are valid according to my system rules, (up to a maximum of 15, which keeps me just above the minimum to prevent a margin call).

So my individual trade is low leverage, but my overall leverage is between 10 and 15X for all the trades together.

Sounds like you are a discretionary trader, are you?

I think he means total true leverage. Us retail guys look at our money a little different as it is our money.
If you handed over some money to someone and they took 10% off the first month what would you think? Or if you were in charge of some traders and one of them blew right through 10% of the money they were responsible for what would you have them do?

That’s what the 5% risk per trade crowd blahblahblah in here does not understand.

2 losers in a row and 10% is gone up in smoke.

The trader responsible for blowing it would be run out of dodge.
That’s on a good day.
On a bad day the trader responsible for it had the choice between jumping out the window and a ticket to the mental institution.

Your math is faulty, my friend. The second trade would be 5% of the original equity MINUS your first 5% loosing trade. You would be down slightly less than 10%.

Well, you are not far off the mark.

I would think both of us must have had the risk part covered as it happend. :cool:

Only if you recalculate after each and every trade.

You seem to have issues with calculations.

No. Not at all. You made an assumption that may or may not be true.

I make no assumptions. You do enough of that on your thread.

I do math. :slight_smile:

Yep thats me… always use disgression… if it looks good I trade it… if not I’ll pass it by. Is there another way. :confused:

He doesn’t know any different.

Let him play. :slight_smile:

Not if you want to save your a** for another day. :smiley:

Fine, I’ll stop. Ok, back to trading. :slight_smile:

“disgression”? :eek:

Yup. That’s right. As rookies, we came here to post. This is babypips remember?

But thinking how much to win is not in my mindset though. I calculate and accept my risk before entering all my trades and I only trade TF no less than 4hrs and with 0 leverage so any losses will not upset me too much. I look and wait for all these opportunities and think how much I can lose before I think how much I can profit from it because I understand this is a game of probability and anything can happen. That’s my style. What I meant was the 6% rule seems to be too overly-conservative to those traders using 2% loss limit rule.

Anyway, I was suggested in other forum (I posted the same question over there) that monthly loss limit should be determined by the basic capability of your trading system, the profit range and the loss range of the month and using this expectancy to gauge a the loss limit trigger point.