Simplifying abort criteria after two losers, costs included

[LondonScalper]

After two losers in a row, my abort rule used to be complicated. Now it is simple, and it includes costs.

The rule: after two consecutive full losses in one session, I either stop for the day or switch to observation only, with half size allowed for one more trade if a clear A-grade setup appears. That is the whole rule.

The cost part: if spreads are wider than usual at that moment, the half-size option is gone. Wider than usual means more than 1.5 times my normal spread for the pair. The reason is simple: after two losses I already want to win money back, and if I then trade with expensive spreads, I have to be right even more often just to break even.

What I removed from the old rule: a list of exceptions about different setups, times of day and pairs. In practice, I used those exceptions to justify a third trade almost every time. Fewer options means fewer arguments with myself.

Results since changing it: fewer three-loss sessions, and my worst days are noticeably smaller. The half-size trade after two losses is taken maybe once every couple of weeks, and it is roughly breakeven. Mainly it stops me from feeling that I gave up too easily.

[Shadow Trader]

The 1.5 times spread condition is the part I'd borrow, because it targets the exact moment the urge to win back is strongest. After two losers I'm the least likely to notice that the spread has quietly widened.

Worth deciding in advance is what counts as consecutive full losses. If I take a full loss, a scratch, then another full loss, has the scratch reset the count? I used to let it, and that was exactly how three-loss sessions crept back in.

Now only a winner of at least 0.5R resets my counter. Scratches and small partial losses are neutral, so they neither add to the count nor clear it.

On costs, it's worth checking whether your normal spread includes commission. On EURUSD at 0.2 pips plus commission, 1.5 times the spread adds a tenth of a pip, while on GBPJPY at 1.5 pips it adds 0.75 pips, close to 0.1R on an 8 pip stop.

A roughly breakeven half-size trade sounds like the honest outcome. It isn't there to make money, it's there to stop the feeling of quitting early, and half size keeps that cheap.

Do you limit the half-size option by time of day too? Mine is only allowed before 10:30 London, because late setups after two losers were my worst.

[Shadow Trader]

LondonScalper, I wanted to see what your rule does to the shape of bad days, so I sorted my own sessions from before and after I adopted something very close to it. That is 100 sessions each side, bucketed by the session result in R after costs.

The chart below is an illustration of that split. Sessions worse than minus 3R went from 9 to none, while the bucket from minus 2R to minus 3R grew from 6 to 11.

img_13352_r2.png (62.95 KiB) Viewed 10 times

That second number surprised me at first, but it is the rule working. Two full losses plus a losing half-size trade is 2.5R, and with costs on top my worst session since the change was minus 2.6R.

So the rule does not make bad days rarer, it makes them a known size. The sessions that used to run to minus 4R or 5R now stop at the cap, and that is where most of my improvement came from.

One thing I would watch is the 1.5 times spread check on the half-size trade. Does that spread get measured when the setup appears, or at the moment you would click, since those can be a minute or two apart?