The Two Strikes Rule: A Risk Management Must in Trading
When learning how to trade stocks for yourself it is important to set rules for yourself or else you’ll throw good money after bad. This simple two-strike rule has saved several savvy investors from shooting their whole bankroll on a single idea. Learn from the best and get your trading game in gear!
- To put it simply, the 2 Strikes Rule says that if I have two losing trades in a row on the same trading idea, I will not trade that idea again.
- Once I am stopped out twice on an idea, I let the idea go and look for other opportunities.
- Even if you have backtested and forward tested your system and know what to expect, there may still be times where a trade can look a lot better than it is.
“So take some time to experiment with this rule or some sort of similar rule that will keep you from going down the rabbit hole of revenge trading.”