Do you any of you practice Weekly max loss? For instances, weekly drawn down limit lets say is 2 Percent. If we come extremely close or hit the weekly stop limit we stop trading for the week?
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The only reasons to stop trading are to allow time to revise your strategy rules - for this you might want to go back into demo trades - or because the market has become unsuitable to your strategy (for example it is ranging and volatile when what your strategy needs is smooth trends).
Losses alone are not a reason to stop. If you have a profitable strategy, stopping your trading randomly will lead to random outcomes: if it is consistently profitable, keep trading, but make sure your risk per trade is limited by adjusting your position size, using stop-losses etc.
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I share the same opinion as @tommor that it would be meaningless to have a weekly limit. And, even if you did, then 2% would be far too low. That is a typical figure used for single trades, so that would mean if your first trade of the week is a loss then you are done for the week! That does not make sense.
Your trading structure is designed to produce a net gain over time and if it is not doing so then there is reason to investigate why. But if you apply a weekly loss limit then you may just as easily be shutting out potential winners as more potential losers, which ends up distorting the overall picture.
However, I think you are on the right lines in your thinking. If you suddenly experience a change in the proportion of losing trades then there is good reason to pause and review what is going on. As @tommor says, this may be due to a change in market movements or a sign that your strategy is not working in the same way.
Afterall, if your car starts coughing whenever you are driving it you donât just ignore it and continue until it breaks down completelyâŚ
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If anyone is consistently losing 2% or more per week, they should take a long break from trading live and in the meantime examine what/why happened to their trades. Losses are normal, and itâs just as likely to have losing streaks and winning streaks.
One week this April, I had eight consecutive losing trades on the Asian markets for no discernible reason, apart from market sentiment âoverreactingâ to news items. I just continued to make good trades, which was my best continuation while I identified it caused more retracement reactions during a trend in todayâs Covid 19 economic climate.
Hence, I shifted to identifying trading breakouts on the London opening session, which has provided a better understanding - and maybe an alternative strategy to consider.
Of course, I might be completely wrong, but itâs my best âguessâ right now.
Yes, I do not agree to lose more than 2%. Because if I do not maintain money management and risk management, it will be impossible for me to survive in trading. As a trader, I first need to know how I can make a profit by combining loss/profit. For this, I have to maintain the journal. Now and then that journal will have an idea about the trading concept and the percentage of risk I am taking.
Donât stop your trading without any major reason because it can have an effect on your profits. If you are modifying your strategies or you are analyzing it, then you can think of leaving trading for a week. Else, it is not beneficial.
The more you take live trades with your strategy the better you become. I do not agree to setting weekly loss limits. There are weeks that your 1st set of trades would be loss and your last trade would recover all. My advise is stick to your trading plan.
I guess that if you have a lose streak even 2% per week youâd better delay your trading activity on a live account and go back to demo. In such cases you ought to determine the shortcomings of your strategy which caused such lose streak. After the determination you should think of how you can fix your strategy for better. Moreover you have to exclude that this lose streak was caused nby stress, mental instability and other reasons which are conneted with you mental health. It really matters. Then you will be able to go back to trading on a live account, donât forget to rest from trading, because your brain also needs a break.
I believe that every trader who starts his/her career in trading activity has to set the percentage of weekly max loss. Itâs incorrect to count this percentage according to day results because these results like roller-coasters. To my mind, the optimal maximum of weekly loss varies from 2-5% of your initial deposit. This is the border which must be complied by any trader who is eager to develop in trading activity and never lose his deposit. In my opinion, itâs kinds difficult to approach to such border, however it will teach novices how to comply risk management and money management practices I guess.
I guess that itâs an individual thing, however we always should strive for the best. According to my knowledge, weekly max loss should be no more than 5%, nevertheless it also depends on your experience and practice. If youâre a beginner you would better stay off counting weekly max loss, because you face lots of losses because of lack of knowledge, skills and experience. However, if youâre a professional traders or just already gained some exprience in trading, then you can count it. I believe itâs great indicator in order to understand whether your strategy works or not. You should count it every week.
To prevent loss in forex trading, keep these 3 things in mind:
- Cut your losses quickly by following a stop-loss order
- Donât let your emotions lead you to take on more risk than necessary.
- Keep most of your money in trades that are less risky.
Weekly loss limit is a part of exercise I do with any new strategy.
I start with lowest risk possible, set weekly limit and allow myself trade bigger positions / higher risk only, if profit for given week is higher than X. Detailed rules will vary, but the idea is to get comfortable with small amounts and increase risk/potential, if successful. Weekly limit act here as âcalendar stop lossâ - I know I will not lose more than Y in Z weeks - that gives comfort and allow to easily plan the funding for the exercise.
If you look at prop firms rules you will often see a weekly or monthly loss limit - thatâs good from capital protection perspective. Knowing the cost and limiting it is crucial in business - forex is business. Do you think you know better than companies that live out of profitable traders? 