One risk budget for a setup and all its re-entries

[Fairman]

One risk budget for a setup and all its re-entries

Getting stopped out and then re-entering the same setup a few minutes later is normal in scalping. The level is still there, price swept your stop and came back, and the idea still looks right. The problem is that each re-entry gets sized as a fresh trade, so one idea can end up costing two or three times the planned risk before you've admitted it isn't working.

What I do now is give each idea a budget instead of each trade. If normal risk is one unit, the idea gets one and a half units in total. The first entry uses most of it. A re-entry after a stop can only use what's left, which means a smaller size or a tighter stop. Once the budget is gone, the idea is finished for the session no matter how good the next touch looks.

Defining what counts as the same idea is the part to settle in advance. Same level, same direction, same session is my rule.

[FXS HongKong Scalper]

We run something very close to this, with one extra rule: the budget resets only when the idea is invalidated by structure, not when time passes. Otherwise it is easy to tell yourself that 20 minutes later it is a new idea and the budget is fresh.

The other benefit is in the journal. When re-entries are grouped under one idea ID, you can see whether second and third attempts actually have positive expectancy. In our logs the second entry was fine, the third was clearly negative, so we now allow at most two entries per idea, with the second at reduced size.

[Fairman]

The smaller size on the re-entry often bothers people, because the second attempt can feel like the better trade. Price has already shown you where the stops were, and the sweep looks like confirmation. Sometimes it is. But the stats on a single level don't change just because you got stopped once, and from the outside, a level that has already failed once is weaker, not stronger. Sizing down acknowledges that. If the re-entry works, you still make money. If it doesn't, the idea has cost a known amount and nothing more. That certainty is most of the value.

[Fairman]

A different level in the same direction can be a new idea, but I'm strict about it. If the first trade was a long at the Asian low and it failed, a long at yesterday's low twenty pips further down is a separate level. Fair enough. A long two pips under the first entry because the low got swept is not. That is the same idea with a slightly moved line, and it draws from the same budget. Writing the level price for each idea before the session makes this easy to judge without arguing with yourself in the moment. It takes a minute in the morning and saves a lot of debate later.

[Fairman]

Time can reset the budget too. An idea that failed in the London morning might set up again in New York with a completely different context. I let the budget reset after a session change, or after a set number of hours, whichever comes first. Without a reset, a good level could be locked out for the whole day by one early stop, which is too restrictive for how levels behave across sessions in practice. New York traders often defend or attack the same levels that London left behind, and they do it with fresh orders, so treating it as a new idea with its own budget is reasonable as long as the reset rule was written down before the day started.

[Fairman]

This sits alongside the daily loss limit, not in place of it. The daily limit stops a bad day from becoming a disaster. The idea budget stops a single stubborn view from eating most of that daily limit before anything else gets a chance. Together they spread the day's risk across several ideas, which is usually healthier than letting one level decide the whole session. In the journal, I group trades by idea so it's clear how much each one actually cost, re-entries included. Seeing that number per idea, rather than per trade, makes it much harder to pretend a stubborn level was a string of unrelated bad luck.