Originally published in French on objectifeco.com, May 24, 2012. The site was purged in 2016; this text survives only in the Internet Archive (Snapshot). Translated, not rewritten: what follows is the original argument as it was made, including what time has since proven wrong. Where that happens, you'll find a note from the desk, dated 2026.
First, one of the (yet again!) hardest things, and one you will, with absolute CERTAINTY, be forced to do at least once, if not several times, over the course of your career: cutting a position at a heavy loss.
Let me tell you about my very first days in this business.
In 1995, I'd opened a trading room for private individuals. Before the internet, and all the tools that came with it for accessing the markets or managing a portfolio, became available to everyone, it cost a great deal of money, and for a monthly subscription, traders could come to places like mine to trade live.
What struck me most, in those years, was watching men (and women) so frozen by their losses that they could no longer even place an order to get out of the market.
And when I say "no longer able to," I mean it both physically and mentally. They couldn't hold the phone. They couldn't dial the number, their hands were shaking too badly. They couldn't even get the words of their own order out. Some of them asked me to help.
That memory has stayed with me. It's a violent one.
That moment will always be a trauma. There's no point trying to dodge it: taking a huge loss, watching months of gains called into question, blowing up an account, all of it leaves scars.
And the surest way to make that moment even more painful is not to prepare for it, and to tell yourself it only happens to other people.
I remember my own first enormous accident like it was yesterday.
Who doesn't remember where they were on 11 September 2001?
There's no telling in advance how any one person will react in a moment like that. What's certain is this: if you've thought it through beforehand, and you've got a defence plan in place, you'll come through it far better than if you hadn't.
For my part, I'll give you TWO PIECES OF ADVICE, non-negotiable ones.
– Set yourself a maximum loss threshold, and hold to it, always.
Your account is your tool of the trade. Your capital is your raw material. Once it's gone, it's GAME OVER, for good.
Personally, what helps me is knowing I'm capable of producing gains.
At –50% (my maximum drawdown), I know I start losing sleep. There's no point sacrificing your health over it. It's only money.
At –50%, WHATEVER my convictions about the market, even if I'm certain I can't possibly be wrong, I cut. Whatever happens, I cut.
- Second: I close every screen, and I take a break from the markets entirely. A heavy loss is like an injury in sport. Every day, I see people who've been thrown from a horse, or come off a bike, get straight back on, supposedly to avoid the trauma taking hold. I don't know who came up with that idea, but it's nonsense. The moment people don't cut their exposure after a heavy loss, they've lost all confidence, they haven't even taken the time to work out what went wrong, they're in revenge mode, nothing left is rational, and the only thing that's going to happen is bigger problems still.
The most important reason of all is that once you've left your position, the market can do absolutely anything.
It might keep going the same way, and for a while you'll tell yourself, "I got that right."
But a minute, a day, or a week later, it'll end up doing roughly what you'd originally expected, and that's when you'll say, "damn it, I knew it, I should have stayed in."
And that is the worst of the worst of the worst.
That's exactly the reason why, next time, you won't respect your maximum loss threshold, and there's a good chance that decision will be the one that ruins you.
Take my advice: the market will always catch you out, one day.
On that day, step away from the market long enough to rebuild yourself. Staying and living through it certainly won't solve the problem, or wipe the slate clean.
Like an injured athlete, go to the treatment room, ease your way back into training, play a few matches to test yourself, and only then will you be ready to cross swords again.
The market will always be there. The opportunities will always be there.
But if you stay in, the market will finish you off without mercy.
Part of a series. This article belongs to The Exit Decides the Trade, Not the Entry. Related: Who's Capable of Holding a Position Like That? and Winning Trades Make All the Difference. Background: stop-loss order in the Ouinex glossary.
About the author. Samuel Rondot has traded since 1995, self-taught. Between 2009 and 2017 he published around 300 articles on objectifeco.com, abcbourse.com and his own blog, many of them drawn from what he saw in hundreds of client accounts. Objectifeco wiped its archive in 2016; the Internet Archive kept a copy, and every article republished here links to its original. He now runs the Strategy at Ouinex.
Trading leveraged products carries a high risk of loss.
