Daily Stop Loss?

Hi All,

I haven't been around for a while. Been doing pretty well but I am having a little issue which I am sure many have faced...

I have great days, weeks even but then I seem to be able to ruin all of my hard work with a day or two of ridiculous trading. The days usually start off ok or as normal but then after a few losses I find I just can't seem to pick a good trade.

Now the market condition will have a lot to do with this, but surely there must be a way to limit my losses on these days.

So I have been reading a few books and was looking at the idea or using a daily stop loss.

My question is do any of you guys out there who are successful daytraders use such a limit? Do you believe it is valid? If so what sort of a limit? Half your average day profits?

Also what about the idea of a day profit target?

Then further to that maybe a rule whereby you don't give back more than 50% of your profits you made on a particular day?

I would be interested in your thoughts on the subject. Basically if I can eliminate the days when I blow up, I would be quite successful, but at the moment my equity curve is a little too volatil for my liking.

I look forward to your thoughts.

AFX

I have seen an approach whereby a moving average is placed on an equity curve and should equity fall below the average, risk is reduced or trading takes place on a simulation account until the MA is breached to the upside. In practice this suffers from the same problems as using an MA in a trading strategy, namely chop. But if you just have 1 or 2 really bad days before resuming an uptrend in equity it might be useful. Also, Mark Douglas talks about exactly your problem in some of his talks.

Generally I think a worst case daily stop is a good idea for a day where for whatever reason you're just not being yourself. I have software that wont let me put a position on once my losses reach a certain level. I can always change that level after the fact, but usually once it's hit I know better. Another option is to set something up with your broker, which would be much more foolproof.

Thank you for your response. It makes sense. I think I definitely need a daily stop limit.. it might make me more picky about my trades as I don't want to sideline myself, so I might be more careful.

My trading is very much like my golf... a few bad holes ruin my round... I need to focus on limiting bad days and then the good days will take care of themselves.

I don't have a daily stop loss exactly. If I'm having a day where I'm following my method(s) properly but am still getting stopped out then I know it's just time to quit for the day. Sometimes the market is just not in tune with your trading for that day, no sense fighting it. I'd rather not attempt to make it all back and risk going from a bad day to a worse day. There's always tomorrow.

Peter