Mastering the 3-Stop Strategy
I received a question about my 3-stop strategy, and I thought it’d be helpful to elaborate on the rationale behind it.
The core principle is to reduce your losses well before a trade hits the full stop—ideally keeping them far below -1R. There are many creative ways to periodically scale down size in newly executed position that may not seem to be working.
If your full-time job is aligned with U.S. market hours and you don’t have the flexibility to actively monitor your trades prior to the market close, the 3-stop strategy can be a game changer, capping most losses around -0.67R. The same benefit applies to those of us in the Asia-Pacific region, where market timing presents similar challenges.
If I were to have the luxury of being present consistently prior to market close, (consistently is the key word), i will definitely do a 50% size down of newly executed trade on day #0 not showing any unrealized profit, on top of my 3 stop strategy. This will greatly reduce eventual R loss much further than -0.67R.
You need to build a strategy that aligns with your lifestyle for long term sustainability, and most importantly longevity. From there, you refine and strengthen your edge—not the other way around. This is a major reason why many struggle to sustain day trading over time, it requires a whole new level of energy, focus and commitment to the market. big respect to BrianLeeTrades for this.
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