THE SIX PERCENT RULE

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Guideline used by professional investors is the ‘6% rule’. If your losses reach 6% of your equity from the start of the month, it is time to take to take a break from trading. This is a great way to regulate yourself. Once losses start to roll in, people get scared. These losses will naturally stop a lot of people from trading anyway, but not everybody is like that. Numerous investors simply continue to trade even after numerous losses. This time, though, they take even bigger risks, as a means of gaining all their losses back. This is gambling. It needs to be avoided. A quick succession of losses can lead to an irrational panic where traders do whatever they can to claw back their money. The 6% rule protects you from continual losses, and gives you a break. The 2% rule protects you from huge losses all at once
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