{"id":7637,"date":"2010-10-11T12:46:53","date_gmt":"2010-10-11T16:46:53","guid":{"rendered":"http:\/\/www.smbtraining.com\/blog\/?p=7637"},"modified":"2021-02-11T17:02:48","modified_gmt":"2021-02-11T22:02:48","slug":"traders-ask-should-i-have-a-max-give-back","status":"publish","type":"post","link":"https:\/\/www.smbtraining.com\/blog\/traders-ask-should-i-have-a-max-give-back","title":{"rendered":"Traders Ask: Should I Have a Max Give-Back Rule?"},"content":{"rendered":"

\n

Hey Bella,<\/p>\n

How is everything?<\/p>\n

I have a question for you. I have this one problem (amongst many others) that I am having a tough time overcoming. Whenever I make a few good trades on the open and I have a nice P&L for the day I sit there the rest of the day and force trades and give back a good portion of my day. After I reach a certain P&L I would like to just shut it down for the day and go home but I feel that I need to as you say “trade until the bell”.\u00a0You never know when the next big trade is around the corner.\u00a0Can you offer any insight on this?<\/p>\n

\n

Bella Responds:<\/strong><\/p>\n

Great job\u00a0identifying\u00a0an area to improve. If I had a nickel for\u00a0every time\u00a0we had this issue with one of our traders because I have to say that almost never will a trader identify this issue and come to us for help. Almost always we approach the trader about giving back too much after a strong open and working on some rules to keep more of their P&L.<\/p>\n

Dr. Steenbarger <\/a>recommended we institute a give-back rule of 25-30 percent for our traders. This is a common rule employed by big hedge funds (granted on a different trading time frame). What we do internally is ask our traders to talk with our floor manager about their give back rules. The trader and the floor manager agree to risk parameters and then the floor manager must enforce these rules and the trader must accept the enforcement of them. \u00a0But the rules are agreed to by the trader and the floor manager prior to any of this. \u00a0When a trader hits his give back number he is done for the day. The floor manager shuts him down.<\/p>\n

At other firms a risk administrator is in charge of trader risk rules. \u00a0I am sure at your firm you have such a person. Go find him\/her and craft rules that will help your P&L. Empower the risk administrator to shut you down when you hit a certain give back. Each quarter adjust your rules to make sense for your present trading. BTW you might also adapt rules for how many stocks you can trade intraday, an intraday loss limit, auto demo trading if stopped out three days in a row consecutively, etc.<\/p>\n

For those reading at home who do not have the benefit like reader Eric of trading with a top prop firm, then create your own rules. And find a way to stick to them as if there was an enforcer who would not let you trade after you hit your max give back. This will improve your P&L at the end of the month.<\/p>\n

I love how you are pushing yourself while you are up. There are days when we see the screens better so I love you trying to make more. I would just sit down with your risk guy and create a trigger to shut it down for the day after a strong open.<\/p>\n

Good luck. Please let us know how you decided to handle this issue.<\/p>\n

Mike Bellafiore<\/p>\n

Author, One Good Trade<\/a><\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

Hey Bella, How is everything? I have a question for you. I have this one problem (amongst many others) that I am having a tough time overcoming. Whenever I make a few good trades on the open and I have a nice P&L for the day I sit there the rest of the day and force trades and give back … Read More<\/a><\/p>\n","protected":false},"author":144,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1,10,908],"tags":[75,1430,4674,81,1193,653,1354,1349],"class_list":["post-7637","post","type-post","status-publish","format-standard","hentry","category-general-comments-2","category-mike-bellafiore-bellas-blogs","category-traders-ask","tag-dr-steenbarger","tag-give-back-rule","tag-one-good-trade","tag-smb-training","tag-trader-education","tag-trader-training","tag-trading-coach","tag-trading-mentor","no-post-thumbnail"],"yoast_head":"\nTraders Ask: Should I Have a Max Give-Back Rule? | SMB Training<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.smbtraining.com\/blog\/traders-ask-should-i-have-a-max-give-back\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Traders Ask: Should I Have a Max Give-Back Rule? | SMB Training\" \/>\n<meta property=\"og:description\" content=\"Hey Bella, How is everything? I have a question for you. I have this one problem (amongst many others) that I am having a tough time overcoming. Whenever I make a few good trades on the open and I have a nice P&L for the day I sit there the rest of the day and force trades and give back ... 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