why you should have a daily loss limit in forex
So yeah, I decided to create this thread after my experience in dealing with losses. First of all a daily loss limit is a fixed amount of money that you are prepared to lose when trading for a day.
I always maintain a $10 daily loss limit because i trade 0.1 lot size on eurusd so basically this means a 10 pip daily loss limit. Depending on the lot size you trade you should find a daily loss limit you can tolerate, and stick to it. Inability to stick to a daily loss limit means you lack one of the traits of being a successful trader which is discipline.
When ever i reach my daily loss limit, i shut down my laptop and leave the house so i am not tempted to trade again. Now, for me daily loss limit has nothing to do with the number of trades i take in a day. I can take 20 trades it doesn't matter, but what matters is that my total loss on those 20 trades, does not exceed my daily loss limit.
The advantage of setting a daily loss limit is that, it keeps you afloat to be able to trade another day, as you will always have some money remaining in your trading account.
Daily loss limit also helps you deal with the temptation of averaging losses or trying to overtrade to recover losses you made. Psychologically, the human brain is wired to try and recover losses but this can end badly. When you enter a trade and make a loss, re-entering can be dangerous because the market dynamics that caused the loss have not yet changed.
Before you know it, you could find yourself spiraling out of control & chasing the market in a cat and mouse fashion and you will only end up sustaining more losses. If you had walked away when your daily loss limit was reached, you would have saved yourself the heartache and financial losses that followed. Remember that "the market can stay irrational, longer than you can stay liquid".
Just thinking out loud here guys, let me know what you think.
Totally agree, because in forex some days are just bad days where the market is in disarray. You will be lucky to even make a 10 pip profit without taking unnecessary risk on such bad days. Now imagine that on a day like that you decide to trade without a daily loss limit, you will definitely blow your account.
Love this! Re-entering a losing trade is like playing with fire—it can quickly spiral out of control. Setting a strict daily loss limit protects you from disaster, especially in highly volatile markets where emotions and unpredictability run high.
I have a 3% daily loss rule, so i ensure i do not lose more than 3% of my total account balance in a single day. Once my loss gets to 3% i stop trading.
We (retail traders) should have a daily stop limit to stop us from destroying ourselves. Professional traders working with banks/hedge funds also have a daily loss limit so how much more a retail trader? Whenever you feel you cant control yourself and you want to overtrade, just withdraw the funds from your trading account. It is better to use that money to buy ice cream than to dash it to the market 🤣
We (retail traders) should have a daily stop limit to stop us from destroying ourselves. Professional traders working with banks/hedge funds also have a daily loss limit so how much more a retail trader? Whenever you feel you cant control yourself and you want to overtrade, just withdraw the funds from your trading account. It is better to use that money to buy ice cream than to dash it to the market 🤣
Hey @scooter you are right but some brokers have a high minimum withdrawal limit so withdrawing funds may not be possible if your account balance is below the withdrawal limit.
If your strategy does not work today, it may work tomorrow so don't finish your money on one day. Reserve some funds to try again the next day and you may even recover the losses from the previous day and still make a profit. Wisdom is profitable to direct!!!
Daily loss limits are the holy grail of trading. For me, $50 is my average daily profit target so why would I want to lose more than $50 in a day? If in one single day I lose say $150 it means 3 potential days of profitable trading has been wiped away. Hope I am making sense.