3 signs to stop trading for a particular day

[TheCapitalManager]

Today We would talking about something that every trader faces on particular days. Many of us have already experienced the following situations.

You had a great morning with huge profits. You became overconfident in your trading decisions and gave back all profits and a bit more in the afternoon. After giving back all your gains your subconscious mind tells you that “you are a bad trader” and that “you should have stopped”. The trading week is ruined for

On another day you had a really bad start and lost some money in the morning already. You became frustrated and doubled your position size. Shortly before your stop loss is hit for a huge loss you adjust your stop “to give the trade a little more room.” You ended up that day wiping out a large chunk of your accoun

Sounds Familiar ?

Maximum Daily Loss

The first rule should include a maximum daily loss after which you would stop trading for that day. If you lost a significant part of your account at midday already it is often better to switch off the screens and come back on another day. Remember – the market will be around tomorrow as well, your account might not. You should therefore set a maximum daily loss level. This could be 5 % per day, 10 % or 20 % and is entirely up to you and your comfort level

Morning Profit Give Back

The second rule you might want to introduce is regarding how much of your accumulated profits are you prepared to give back. Let`s assume you had a very good morning session and you are sitting on some nice profits for the day. A good trader should be able to keep most of these profits and does not let this day become a losing day anymore. You should therefore ask yourself how much of your morning profit are you prepared to give back for that day? An option in this situation is to trade only certain setups or to halve your position size.

Some traders even switch off their screens if they have hit a predefined profit target for a single day. Once this amount is hit they stop trading for that day. It works for this group of traders but it has to be mentioned that in this way you will never have an “outstanding” day with regards to profit

Trading After Profit Gain

It is always difficult for a discretionary trader to decide when to continue trading after a certain profit level was hit for the day. Even if you do not set yourself a certain profit target for a day you might experience a situation when you feel happy with the current result and start weighing the amount of research and attention a new trade requires against the risk of losing what you have got. On some occasions you might make some extra money and on some occasions you might lose again a healthy part of your gains. There are a couple of things you might want to take into consideration when making the decision to continue or not.

Personal well-being

An important aspect is your personal well-being. Are you still in shape to give the market the attention it needs or are you switching off mentally already? If you find yourself tired and not attentive enough anymore you might want to call it a day.

Market Conditions

What are the market conditions? You should evaluate if the market conditions are still good or if you only want to continue because you seem to be “on a roll” today and everything is working. If the market conditions have deteriorated you should not risk a big part of your profits anymore that day. All these aspects you need to weigh when you make the decision to continue or no

Understand them better.

[Barney20]

In the forex market, trading is not a do or die affair. A good trader should be able to know when to close his trade or even quit the market for the trading day. Now if the market is experiencing an increased volatility and notice that the market is kind of choppy, I could adopt Relative Strength Index (RSI) for my technical analysis. Now the Relative Strength Index is a momentum oscillator which will help you calculate the change and speed of price movements. If I am looking for the best effectiveness , I will use the RSI indicator to determine divergences between the indicator itself and the market analyzed. But don't forget that using the Relative Strength Index will best perform in a choppy market, so once I notice that the market is no longer choppy, the whipsaw movements on the charts no longer there and prices are becoming steady again, it will be the best sign to exit the markets.