Repairing Slows Everything
I used to repair these trades, roll down the untested side, give it one more month, and this year I think I'm done with that. Repairing slows the bleed, and it also slows the money coming back on a squeeze, so I think I'd rather just close it.
Half of Max Loss
Max loss here is 17.7, half of that is 8.8 down, and that is the line on the chart, approximately the 76 level. I backtested 50% against two years of my trades, and 50% seemed to be a good number. At win one, lose two, a 50% cut feels harsher than at one to one. I think the point is sticking to one percentage.
Insurance Costs Money
Say rates go to 6% and nobody does anything about it, and I refuse to cut: then I lose all of it. Risk management is expensive, like paying insurance, and losing the entire trade costs more. Sure, the moment I cut, it may squeeze up. That is the premium.
The Exit Plan
Now this trade is about managing the loss. If it comes back up comfortably, slowly to 38, I'm out. If it squeezes and then stops going up, I'm out with a loss of 20% maybe, and happy with that. If a trade makes me hate it, the size is too big.
Every Wednesday we run a session like this on a real portfolio. One free lesson a week lands here; the full calls and the archive are part of the Elite Trader Program.
🚨 Educational content only. Not financial advice. Past performance ≠ future results.