The above photo is a screenshot of PLT’s Capital Defense Calculator that will automatically calculate your risk parameters based on:
The output provides you the max risk you can take per trade. Also if you know your entry and your stop loss, the table on the lower right will tell you quickly how many contracts you can use.
The main instrument I traded was NQ and the max stop loss I used was 5 points based on the calculator’s output.
The types of trades I would look for aligned with daily pivots, fibonacci retracements and trendlines. I would use the larger timeframes (30min to 1H) to get the bigger levels then drill down on the 5min and 512 tick charts to identify my entries based on my allowed risk once price reached those levels.
How I Avoided a Reset and “Stayed in the Game”
Each trade had a potential profit target of 2R or more, i.e. I risk $100 to make $200+.
My average win rate ranged from 65-70% so I expected to lose on some trades. But overall I would come out on top.
I would not look to increase position size from 1 lot to 2 lots until I had at least $100-$150 in profits so that any loss would bring me to breakeven or a very small loss.
I would decrease my position size back to 1 lot after losing on a 2 lot trade.
When the market volatility increased, the risk also increased so I waited for price action to settle down back within my risk parameters.
Everyone’s approach to trading is different so it’s important to adjust your risk parameters based on what your comfortable with!
Get Paid Often while Adding to Winners
I do believe that you should maximize your winning trades, but it’s also extremely important that you remember to get paid first.
Once you get paid a little and build a nice cushion for the day, you can end up trading risk free with more contracts. This will allow you to have a runner to hit that triple or home run. No one knows for certain whether or not price will hit your big profit target so focus on singles and doubles. Trust me they add up!
You should also focus on only adding to winners. This is such a beautiful habit to work on building so you can maximize the trade when it’s working in your favor without increasing risk.
For example on a trending day, or when I recognized the market could move significantly in my favor, I would trim my position (get paid first) then re-enter on the pull backs then add on the retests after each leg up while trimming again to keep getting paid.
By the time you are fully out of the trade, you look at your P&L to see that you just made $1,000 by scaling in and out with only 1-2 lots!