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07. Rules

Know When to Stop Trading

There are two reasons to stop trading: an ineffective trading plan, and an ineffective trader.

An ineffective trading plan shows much greater losses than were anticipated in historical testing. That happens. Markets may have changed, or volatility may have lessened. For whatever reason, the trading plan simply is not performing as expected.

Stay unemotional and businesslike. It’s time to reevaluate the trading plan and make a few changes or to start over with a new trading plan.

An unsuccessful trading plan is a problem that needs to be solved. It is not necessarily the end of the trading business.

An ineffective trader is one who makes a trading plan but is unable to follow it. External stress, poor habits, and lack of physical activity can all contribute to this problem. A trader who is not in peak condition for trading should consider taking a break. After any difficulties and challenges have been dealt with, the trader can return to business.

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