Risk Management and Discipline stop trader’s melt-down

Mr France and I had a long chat about his trading session from the previous day.  It had been a tough day for him – we realised that it was probably a case of him not being in the right mindset (he had a lot going on in his personal circumstances) nor in the best phyiscal shape (he had not slept for two days) – this demonstrated itself on the chart via the trades that he took – being married to one particular instrument and trying to claw back earlier losses, and disregarding his strategy and normal way of trading.

I explained that I used a self-check list each morning to avoid trading on days when I am not with it.  Here’s an example of what it looks like. We all read about these type of situations, but it does still happen to the best of us!  So we took some good lessons out of talking it over, and I also pointed out to him all in all, financially speaking it was not a bankroll-destroying day – basically he lost around 6R – given the extreme state of his personal situation, lack of physical well-being and bad trading, this was actually a rather constrained result.  He had not realized that his discipline in still calculating and utilising the correct position sizing for his trades, his promptness in correcting execution errors and his rule to stop trading after three bad trades, completely saved his day and strongly protected his downside!!  He has made a lot of progress in that area.

So the net result was a loss of £500 from a £5,000 account.  Had this happened a year earlier it’s very likely that Mr France would have blown half or maybe even the entire £5k in the session.  But thanks to his much increased discipline and risk management, he can take the loss, learn his lesson, decrease his position size a little, and then carry on trading.  Well done Mr France!

When you are in the midst of it, it’s very difficult to see these things clearly.  This is where trading buddies and trading coaches help tremendously.

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2 Responses to Risk Management and Discipline stop trader’s melt-down

  1. Pingback: 21/5 – Challenges in testing: Setup Clarity | Trick or Trade - the story of a currency trader...

  2. Pingback: 4/11 – Weekly FX Trading & Signs of Progress over last 3 years | Trick or Trade

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