What's everyone's best Defense strategy when trading?

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Wondering how to go about acquiring some defense strategies when trading. Example, things you do to protect your account and reduce losses. 
 
John Jay:
Wondering how to go about acquiring some defense strategies when trading. Example, things you do to protect your account and reduce losses. 

After a trending day, need to be careful on the next day. Because shorts are risky as the upside momentum can continue and dips can be bought and longs are risky as well because price already overstretch. You need to be defensive to protect your gains right after strong trends day.

 

Risk depends on your initial stop loss, lot size, and the value of the symbol. It does not depend on margin or leverage. No SL means you have infinite risk (on leveraged symbols). Never risk more than a small percentage of your trading funds, certainly less than 2% per trade, 6% account total.

  1. You place the stop where it needs to be — where the reason for the trade is no longer valid. E.g. trading a support bounce, the stop goes below the support. Then you compute your lot size.

  2. AccountBalance * percent/100 = RISK = OrderLots * (|OrderOpenPrice - OrderStopLoss| * DeltaPerLot + CommissionPerLot) (Note OOP-OSL includes the spread, and DeltaPerLot is usually around $10/PIP, but it takes account of the exchange rates of the pair vs. your account currency.)

  3. Do NOT use TickValue by itself - DeltaPerLot and verify that MODE_TICKVALUE is returning a value in your deposit currency, as promised by the documentation, or whether it is returning a value in the instrument's base currency.
              MODE_TICKVALUE is not reliable on non-fx instruments with many brokers - MQL4 programming forum (2017)
              Is there an universal solution for Tick value? - Currency Pairs - General - MQL5 programming forum (2018)
              Lot value calculation off by a factor of 100 - MQL5 programming forum (2019)

  4. You must normalize lots properly and check against min and max.

  5. You must also check Free Margin to avoid stop out

  6. For MT5, see 'Money Fixed Risk' - MQL5 Code Base (2017)

Most pairs are worth about $10 per PIP. A $5 risk with a (very small) 5 PIP SL is $5/$10/5 or 0.1 Lots maximum.

 
John Jay:
Wondering how to go about acquiring some defense strategies when trading. Example, things you do to protect your account and reduce losses. 

Everything has a cost, protecting the account and reducing losses typically will also reduce your profits.

Like there's an inverse correlation between risk:reward and win rate. A 1:1 RR has 50% odds and you could reduce your effective risk by taking 1:2 (increase your reward vs the risk). BUT now your odds are 33% of winning. Go to 1:3 and you're at 25%. Draw a pie chart if it doesn't make sense, 1:1 has two pieces each 50%, 1:2 has three pieces each 33%, etc. Keep in mind these are odds, not accounting for any strategy.

It's extremely rare to reduce risk while keeping profits the same, except for a case where say you have a stop and reverse system with 100 pip SL but that SL hasn't been hit in like 5 years. You notice that you can reduce the risk to 50 pips and it still won't get hit. In this case, yeah you reduced your risk, but it ultimately didn't change anything.

There's no free lunch in trading.

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