Trader wipeouts as Paul and Zeev are discussing, is an eerie subject as I've seen the same thing many, many times since the bubble broke. A huge number of people aren't ever coming back to this market because they can't, they lost it all. I know one guy who bet his house literally on nufo a high flying com laser company that went from the 60's to single digits, one old guy who lost a million USD (all he had), one guy who lost 2 million out of 3 million, there is more but you get the picture. I've come to believe the hard way that capital preservation and limiting risk are more important than maximizing gains. Some of my rules FWIW
1. Risk no more than 1% of your portfolio in a trade. In practice sometimes I'll go up to 4%.
2. Never average down, average up.
3. Stop losses of course. I use mental because every time I use a real, the MM's fish for them.
4. Never let a profit turn into a loss.
5. When you go into a trade long or short (plan A), always have a plan B, exit strategy.
6. Lose your opinions not your money (thanks LG). There is more but you get the picture.
One of the three disciplines a trader needs IMO, is emotional control to follow the rules. I don't always do it myself and occasionally have a blowup, none that big lately. I consider myself as liking a challenge and a serious amateur, mostly swing and position trade and actually make most of my money on LTBH (not LTB&hold forever). But I've been up every year since the crash, although not a lot. Just my perspectives and style but watching people get burnt to the ground was a sobering lesson. Good and careful trading.
