Well, since we're talking about heavy stuff tonight, I want to describe how I manage capital:
If I find myself down $300, I quit trading for the day and do something else, hopefully something fun. Something is wrong with something. I have blown at least two stops, probably more.
Hopefully, this doesn't happen, but if I find myself down $600 for the week, I stop trading and papertrade for the remainder of the week. Maybe study some books or something, too. I may have had winning trades, but my losses have exceeded my wins and something is still wrong.... probably.....regardless, though, I'm losing too much right now. Time to take a break.
This rarely happens, but (just in case) if I find myself down $1,200 for the month (a cumulative net loss), I stop trading and papertrade for the rest of the month. If I am following my system, this cannot happen until some time beyond the first or second week, and I may have one or two weeks left in the month, max, maybe only a few days.
This is the best way to control or restrict my losses and at least get back my confidence, if nothing else. The important thing, though, is to make sure I never lose more than $1,200 in a given month, so I'll be able to trade subsequent months. Also, tells me when I need to papertrade more.
Each trader has different capital requirements and other concerns, so the amounts given above would be different for each of us. I am particularly conservative, I feel. I don't want to run up a big, devastating loss whenever the market gives me a crappy month to trade, or if something is wrong with me and I "lose it" for a month.
Does anyone else have a system such as this in place? Or any ideas?
Bill |
