When to Stop Trading After Losses

[tsznecki]

Hello tsznecki,

Yes, I buy and hold S&P 500 index.

I am referring to day trading now.

You missed my point. If you are making money buy and holding, and you are losing money day trading, stop day trading.

 

[DevBru]

Thank you danielc1 for the response. I like your comments.

What are your thoughts on stop trading after X% of account is loss?

Thanks,

Ideally you need more stats in order to answer your question.

I suggest you keep track of everything, even when you stop trading for the day, make sure you keep track of the setups the system still generated after that time, maybe also try to do some back test to gather some data.

The data you get will answer your question on what to do. It might be a good idea to stop on some point, but to know at what point you need those kind of data. Maybe for now stick with a limit you feel comfortable with and when you have more data you can adjust accordingly.

 

[deaddog]

If you have defined your edge and it has a positive expectancy why would you stop trading?

If you haven't then why are you trading at all?

 

[danielc1]

When it comes to the world of science, psychology isn’t one. It is a subject area that is too subjective; conclusions are mushy, and not falsifiable or repeatable. As a college major, it is not in the top 20 (or 30) highest paying majors but in fact one of the lowest. The same is true for graduate school salaries. Trading psychology recommendations are outright silly: Consider this statement: “The most important attribute for making money in financial markets is self-confidence” but how is confidence, self or otherwise, defined and measured? If self-confidence cannot be defined or measured, it cannot be understood so how can it be the most important? The same can be said for this statement: “Do not trade money until you are fully confident in your strategy”. Since “fully” cannot be measured it is useless. Consider the list of 6 keys to managing trade psychology which include “have an edge” (what is that exactly?); know thyself (who me?) and avoid emotional mistakes (My, oh my). Put psychology to the curb.

Trading psychology is nothing more than an explanation of how you act on a situation, namely trading.

You act out of your beliefs about yourself, the market, and that gives you the results you have.

If you use a purely mechanical approach, it still comes from you believing that that is the way to go in trading. If you intervene with the mechanical approach, you do that out of a belief that something is not right or that you think something can be improved.

You, me, everybody acts out of a belief of something.

Those beliefs have been formed. They can be helpful, and useful but they can also be harmful without you knowing it. Then you can get in a loop. Many traders get in the loop of searching for the holy grail. They keep looking for another setup, a different setting for their stops, another system, and so on because there is always something to improve or it is just not good enough to trade. They have trouble accepting the reality that they need to adjust their beliefs about trading in general so they can move on. My belief is that the majority of people failing in trading is just that, not knowing that they do not know they have to look internally to find a solution for their lack of success and not externally, as a new system or indicator.

How do you find my spelling so far? I use Grammarly now. Even I can still get better after conversations with someone on the other side of my beliefs.

 

[LloydPhill]

You could set a daily loss amount that is no more then your average daily win. You could also use a method that gives a maximum percentage back of your run-up of the day. So if you have a profit of 1000 for example, you stop trading when you give back 25% of that 1000 profit. 750 is your limit then to stop trading

Your urge to get back even, after a loss is called revenge trading. And you can guess what I'm going to tell you now: That is only controlable with the right mind set and awareness when it happens.

I did learn something from this comment. In the end we are all pushed toward revenge trading, but let there be a limit.

 

[DevBru]

You act out of your beliefs about yourself, the market, and that gives you the results you have.

If you use a purely mechanical approach, it still comes from you believing that that is the way to go in trading. If you intervene with the mechanical approach, you do that out of a belief that something is not right or that you think something can be improved.

Opening a position because you believe the market is going up or down is one thing, but managing that trade purely on what you believe is a guarantee losing process in the long run.

That is why you need statistics, statistics don't lie so you don't need to believe in them, you can trust the numbers.

You can trade discretionary or mechanically, but it should always be based on what you know from experience or statistics, not based on what you believe.

 

[danielc1]

Opening a position because you believe the market is going up or down is one thing, but managing that trade purely on what you believe is a guarantee losing process in the long run.

That is why you need statistics, statistics don't lie so you don't need to believe in them, you can trust the numbers.

You can trade discretionary or mechanically, but it should always be based on what you know from experience or statistics, not based on what you believe.

Opening a position because you believe the market is going up or down is one thing, but managing that trade purely on what you believe is a guarantee losing process in the long run.

That is why you need statistics, statistics don't lie so you don't need to believe in them, you can trust the numbers.

You can trade discretionary or mechanically, but it should always be based on what you know from experience or statistics, not based on what you believe.

No, no, I'm not talking about wish full thinking or believing in the market going up or down. I'm talking about the deeper insight into how your brain works and how you get to your results.

For example, decision-based action like trusting your numbers of statistics coming from experiences or education is a belief.

 

[Dazz]

Trading psychology is nothing more than an explanation of how you act on a situation, namely trading.

You act out of your beliefs about yourself, the market, and that gives you the results you have.

If you use a purely mechanical approach, it still comes from you believing that that is the way to go in trading. If you intervene with the mechanical approach, you do that out of a belief that something is not right or that you think something can be improved.

You, me, everybody acts out of a belief of something.

Those beliefs have been formed. They can be helpful, and useful but they can also be harmful without you knowing it. Then you can get in a loop. Many traders get in the loop of searching for the holy grail. They keep looking for another setup, a different setting for their stops, another system, and so on because there is always something to improve or it is just not good enough to trade. They have trouble accepting the reality that they need to adjust their beliefs about trading in general so they can move on. My belief is that the majority of people failing in trading is just that, not knowing that they do not know they have to look internally to find a solution for their lack of success and not externally, as a new system or indicator.

How do you find my spelling so far? I use Grammarly now. Even I can still get better after conversations with someone on the other side of my beliefs.

spelling good! Now define beliefs - both helpful (what is helpful and how is it measured - in what units?) and harmful (what is harmful and how is it measured - in what units), mechanical approach (how is it measured and in what units), acting in a situation, accepting reality ( and how is it define and measured - in what units?), the majority of people (how was that measured) and internally/externally for lack of success ( and how is it success measured - in what units?) and do all that 100 times and tell what find.
Your answer is a big bag of hot air - worthless and useless.

 

[virtusa]

You are spot on. But people are not always and everyday laser focused on their trading system. If you have a rule to just stop after a daily loss amount ensures that the day end without any harm, so you can start fresh again tomorrow.

But like that he can also miss a huge profit that might happen after he stopped for the day. That is equal to stop a day with a lot of harm. You never know what the next trade will be.

Your backtesting should give a clear answer for this problem. Backtesting gives you expectancy. This expectancy should give an indication of the risk of another loss in the row.

 

[Dazz]

But like that he can also miss a huge profit that might happen after he stopped for the day. That is equal to stop a day with a lot of harm. You never know what the next trade will be.

Your backtesting should give a clear answer for this problem. Backtesting gives you expectancy. This expectancy should give an indication of the risk of another loss in the row.

Back testing on Ninja 8 yield corrupt data and Ninja admits as much:https://ninjatrader.com/support/helpGuides/nt8/?discrepancies_real-time_vs_bac.htm

most/if not nearly all of the bots I have seen at back tested on Trade Station