Unit 1 · Level 3 · Drawdown psychology
When to stop
Casinos never set loss limits for you. That's your job. A daily loss limit is a number, decided in advance while calm, at which you close the app no matter what. Why a number and not a feeling? Because the moment you need the rule most is exactly the moment your judgment is worst. Tilted-you will never volunteer to stop; the limit decides for you.
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What you get asked
Why must the daily loss limit be a fixed number set in advance, not a feeling?
You're writing a letter from calm-you to tilted-you. Tilted-you doesn't get a vote. That's the entire point of deciding early.
Your account is €20,000 and your daily loss limit is 2%. You're down €250 and a trade risking €200 just hit its stop. How many euros of daily loss did your limit allow in total?
2% of €20,000 = €400. At −€450 you've now blown through it. The limit only works if the LAST trade's risk fits under it: at −€250, the most you could risk was €150.
Recovery math, one level deeper. A tilt spiral takes an account down 60%. What percentage gain is now needed just to get back to break-even?
From 40 back to 100 is a 150% gain. Down 20% needs 25%, down 50% needs 100%, down 60% needs 150%. The hole deepens faster than the ladder grows. This asymmetry is why the walk-away rule exists.
Put the walk-away protocol in order
The protocol ends with the journal, not the next trade. The Trading course taught you to journal every trade. The loss-limit day is the entry that teaches you the most.
You hit your daily limit at 11am and the market keeps moving. What did you lose by walking away?
Missing one day is a rounding error over a career. Blowing up on one day is not. Protect the ability to play tomorrow. That's the whole game. 🐜
The rest of this unit
Losing well is a skill. The spiral, revenge trading, and the art of walking away.