Tag Archives: losses

Keep your losses small

A quick follow up to my last post on risk management. In the approach I outlined in that post the first component of the strategy was to limit losses. I gave the example of limiting losses per trade to 1% of equity capital and my more conservative approach of 0.3% of equity capital per trade. Today I just want to highlight why this is so important. The table and chart below show the % loss versus the return required to get back to breakeven. This is simple math. If you have $1K and lose 50%, it takes a return of … Continue reading

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