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Trading Guardrails

Imagine your sitting in a Formula 1 car screaming around the track at 180 mph. As the tarmac rushes under the car your vision starts to tunnel and your reactions are instinctive. Your decisions have already been made through years of stress and skill building. You have hit your flow and you drive with confidence but all the while, even if you don’t realize it, their are guardrails ready to keep you on the track. One slight twitch and you slam out of flow and test a guardrail! You heel toe the gas and brake. downshift, and look for your path back to the track. Achieving flow again isn’t instantaneous you have to collect yourself see where you have come from and see where you are going.

Flow State

Now imagine price action is the track, your platform is the race car and you are the driver. Before you ever achieve flow you must first build the guardrails around the track. This is part of your job, no other driver is going to do it for you.

No Guardrail

Let’s look at some of the guardrails you should build in:

Only take trades that have a reason

Stop Loss

Max Daily loss

Max weekly loss

Daily Goals

Weekly Goals

Emotional Capital max loss

Daily max on trades

Maximum Lot / Share size

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