Did you do this in your trading?

Think about this yourself.

Did you ever trade with big profits but the market took a turn and your profitable trade turns into a losing one.

And did you put on a 2nd or 3rd traded and so on at a bigger lot size just to try and 'make it back'?

The next thing you know, you have shaved off 20% of your account!

OR

Did you go all out to enter trades just because you have not hit your trading target , even if the setups doesn't comes in line with how you usually trade?

The above are just some scenarios where you just had a bad day and we did not performed as per expected.

To me this is TOTALLY fine. Not performing or having bad days is TOTALLY fine. What is wrong here is that often times we are so caught up with the swings of the market or the ups and downs of our P&L (Profit and losses) that we lost sight of our main objective in the market.

That is Capital Preservation !

Why is capital preservation so important?

Let's think of it in the context of a war, your capital (money) is your ammunition for you to go to the war to fight with your enemies (the market in this case). If you were to blindly lose your ammunition by shooting in the 'air', soon enough you won't have enough of it to fight the 'real' war. Having ammunition also ensure your survivability in the war.

So, how you can go about preserving your capital?

1. To start it off, set a maximum % of loss you willing to take per trade/per day/per week. This depends greatly on the risk profile of yourself. Once that level is hit, you MUST stop trading no matter what.

2. If you have 3 consecutive losses or more (even not hitting your maximum loss limit), stop trading altogether and regroup. Turn of your computer, go do something else, e.g. jogging, cycling or swimming. Don't bring your phone if possible.