Daily loss limit
A daily loss limit is the amount you allow yourself to lose before you stop for the day. You set it before the open, from your account size.
In depth
Work it from the balance, not from the morning. On a 10,000 dollar account, one approach puts 1,000 at risk each day. The maximum daily loss is 400, and the target is around 200. Hit minus 400 and the day is over, whether it is 9:45 or 3:30.
The base should not compound during the session. Say you are up 300 by ten o'clock. The limit is still 400 from where you started, not 700. That is the part traders redraw when the day is going well. A limit that moves with your P&L has stopped being a limit.
Why it matters
The limit exists for the twenty minutes after a bad loss. That is when your judgment is worst and your confidence is loudest. Without it, one ordinary red day becomes the worst day of the month. Traders rarely blow up on the loss they intended. They blow up on the fourth trade after it.
TraderLog will not close your platform. The calendar shows what each day actually cost, one square per day. Automatic tags flag size jumps after a loss and fast re-entries. The stats page shows your worst day and max drawdown.
Frequently asked questions
Small enough that hitting it is a normal bad day. Many traders use a few percent of the account at most.
The day is over. Close the platform and write down what happened. The market will be there tomorrow.
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