⚡ Good Loss Discount: Reducing Threat When Trades Get well
A commerce administration thought to restrict losses when the market exhibits indicators of restoration.
❗ Widespread Downside
Instance: You purchase EUR/USD at 1.1000 with a 200-pip cease loss.
Value drops to 1.0880, then recovers to 1.0920… however finally reverses and hits the unique cease loss.
End result: You lose the complete 200 pips despite the fact that the market had a restoration section.
🛠 Answer: Good Loss Discount
The concept behind this methodology is to regulate the cease loss in your favor when the value recovers from a shedding place.
How It Works
Monitor the shedding commerce.
Activate when the loss reaches 60% of the preliminary threat.
Scale back max loss: Each 10% restoration → scale back 10% of the preliminary loss restrict.
Defend capital: Cease loss is just improved, by no means widened.
📊 Actual Instance
Preliminary Setup
Purchase EUR/USD at 1.1000
Cease loss at 1.0800 (200-pip threat)
Situation
Value drops to 1.0880 (down 120 pips = 60% threat) → System prompts.
Value recovers to 1.0920 (40-pip restoration = 20% threat) → Cease loss strikes from 1.0800 to 1.0840.
End result: If the value falls again and hits the brand new cease loss, the loss is just 160 pips as a substitute of 200.
→ Saving 40 pips systematically.
✅ Advantages of the Methodology
Scale back losses when the market recovers.
Take away emotional bias in commerce administration.
Preserve threat administration self-discipline, with out worsening the preliminary place.
Optimize capital for future trades.
⚙ Tips on how to Apply
Activation level: Loss % at which the system begins adjusting (e.g., 60%).
Restoration step: Restoration % required for every cease loss transfer (e.g., 10%).
🔚 Conclusion
Good Loss Discount doesn’t flip shedding trades into winners, however it will probably scale back losses when costs present indicators of restoration.
Over the long run, minimizing losses on unsuccessful trades means higher capital preservation for the subsequent alternatives.
