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



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  1. >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.

    LOL, this **cannot be emphasized enough**! I have a friend that straight out of college was hired as a professional trader in a prop trading company; he was a fan of the “mental stop” theory: rather than using an actual stop order to go with his trades, he just entered a market order to get out of his positions if the price moved in an area that negates the trading setup that made him take the trade.

    We used to argue endlessly about this: his motivation for using “mental stops” was basically: “when you put a stop order out there, other traders/softwares will see it and go after it!” I kept telling him that he was being paranoid, and he was constantly putting himself in a position where he had to take a critical decision (get out of a losing position!) under pressure – a pressure that kept increasing as his losses gradually creeped up, while he hoped for his positions to get back to at least break even…

    He is really good at “spotting patterns”, but sometimes he was getting caught in nasty price patterns that made him hold on to losing positions that more than compensated the (many more) profitable trades he was making.

    When he was let go by his company after about 6 months because he just could not get his account to break even, he conceded that I was right: if he had used a “hard stop” rule, he would have been wildly profitable for two reasons: (1) obviously he would have lost much less, because of the hard stops limiting losses, and (2) perhaps less obviously, using hard stops would have kept him in losing positions hoping for a recovery for a much shorter time, giving him the opportunity to focus on some other potentially profitable trade instead…


    1. Hi Michael,

      Great story! I’m glad your friend finally understood the lesson. Hopefully he went on to find success at whatever opportunity followed.

      You bring up an excellent point. It’s not just the losses we incur through failing to use or adhere to stops. But also the opportunity we missed elsewhere while we fight with a losing and low-probability position.

      Thanks for sharing this. 🙂


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