At this month’s Meetup, we will be discussing several key principles to successfully trading the intraday timeframe.
One of the most important principles which is applicable to all traders regardless of timeframe is the necessity to cap your losses.
One aspect of trading that attracts a great many traders is the freedom that trading can afford.
As an independent trader, you have no boss – There’s no one there to tell you what to do, how to do it, or when to do it.
This virtue turns out to be one of one of the greatest obstacles for many individual traders to master to achieve any kind of lasting success.
How many of times have you had a string of winning days just to lose all that hard earned money because of 1-2 trading sessions where you lost control and gave all that money back if not more?
Not only is the scenario damaging to your PnL but it is terribly damaging for you psychologically and destroys your trading confidence.
At the end of the day, this is where being an independent trader has its drawbacks.
Institutional traders have risk managers.
Proper risk management dictates strong rules around the sizes of losses that are allowable. If you go over your max loss you’re cut off. Break your risk management rules and those are grounds for termination.
As independent traders we are our own risk managers.
There’s no one to tell you not to overtrade, when to take a break, or when you just need to stop.
And here’s the challenge.
All of us intellectually know that we need risk management rules and that we need to follow them with discipline however trading can often trigger powerful emotions that cause us lose our discipline and self-control which leads to impulsivity and behaviors like revenge trading.
So knowing what we know about this obstacle a great deal of thought, foresight, and diligence needs to be structured to create safeguards to protect ourselves from ourselves.
Here are several suggestions for you to consider to cap your losses:
I hope you carefully consider these suggestions and I challenge you to take your risk management seriously.
As the old adage says, the best traders are the best losers.
Look forward to seeing you at the Meetup on January 24th where I’ll be sharing many more trading principles for success in the New Year.