3 min read · educational content, not investment advice
Most traders size for the good period and discover their limit in the bad one.
Do the arithmetic before the market does it to you
−10% needs +11% to recover
−20% needs +25%
−33% needs +50%
−50% needs +100%
The recovery requirement grows faster than the drawdown. That is why a hard loss limit is not caution — it is arithmetic.
The two limits that matter
Daily: stop at −3%. Ends the day before the third loss changes how you think.
Streak: stop after three losses in a row. Your next trade after three losers is rarely your best.
Then reduce size, not standards
After a limit day, take the first trade of the next session at half size. You keep taking setups; you just stop paying full price to prove you are over it.
Set the numbers once in the risk manager so the decision is already made when it matters.