When trading, it is important to keep your losses to a minimum. Large losses will
cause you financial as well as emotional damage.
We will share three different types of stop you can use to keep from losing your
account in a short period of time.
The Stops are:
1. Trade management stop
2. Account stop
3. Number of losses stop
Trade management stops are the most common method of controlling losses.
You should always trade with a stop loss on each trade. The Trade management
stops method does not set any restrictions on the total losses in your account;
it just controls each individual trade. You can keep on trading and continue to rack
up the losses and not even know what you are doing wrong.
Account loss is a little known and or used way to control loss. You need to
establish a daily loss level if you reach that level you need to discipline yourself
to close all trades and wait until the next day to trade again. A good level would
be around 2% of your account. This is an individual decision;
keep it on the conservative side.
This way you will keep your account at a level that you can recover from and
you have some time to figure out what you are doing wrong.
Another way to control the losses in a given trading session or trading day is
to set the number of losses in a row you will take before you stop trading for
the day. When you are having a losing streak, cut it short and figure out what
you are doing wrong. Then come back, things will be clearer and easier to
see what is going on.
Below is a graph showing how much work you will have to do when you sustain
large losses in your account. At some point you will not be able to recover from
your losses. You will have to add money to your account to get going again.
Total Lost Needed to