Before you even think about strategy…
Reduce the risk of single trade catastrophic failure.
Stop losses are essential. If you think you can operate without them, leave my site now. Unsubscribe. Professional traders respect the risk within the market.
If your platform does not allow for automatic submission of stop loss orders when your entry order is filled, then get a new platform.
And keep single-trade risk to acceptable levels (see Chapter 8).
Reduce the risk of single session catastrophic failure.
Ensure your plan contains a session stop. That is, the dollar or percentage loss that will trigger a decision to HALT ALL TRADING for that day.
If you’re out of sync with the market, get out of there.
Survive to trade another day.
And if you do not have the ability to stick to this decision then find a broker who will implement it for you, preventing further trades once the session stop is hit. They’re out there. If you need this, find one who offers it.
Swing traders… you might wish to extend this to a weekly stop. Or monthly stop.
Reduce the risk of a slow-bleed loss of account over time.
Implement a maximum drawdown stop.
Your trading is clearly not going according to plan.
It’s time to stop. Take a lengthy break. And then reassess.
Take this trading halt as an opportunity to review your trading plan and your trading performance, with the benefit of hindsight.
Return to a simulator environment until such time as (a) consistent profitability is again proven in that environment, and (b) the account balance has been replenished via other sources.
Always remember – your number one priority is to survive the learning phase.
Happy trading,
Lance Beggs