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While all of these may not fit into your own trading plan, some of these rules could help individuals decrease drawdowns.

  1. Make limiting your drawdown in capital your number one priority, not your profits. It is much easier to be profitable when you don’t lose a lot of money.
  2. Never lose more than 1% of your total trading capital on any one trade.
  3. Do not overexpose your account to too many positions that are all closely correlated to the same trend.
  4. Only take your highest probability entry signals.
  5. Only trade one to three open positions at a time, so even big whipsaws in price action do not damage your account too much.
  6. Only trade markets you are very familiar with, and have done excessive research on with charts and backtests.
  7. Trade smaller and smaller during losing streaks, and only get back up to full size during winning streaks.
  8. Use option contracts to cap possible maximum losses to only the contract size.
  9. Do not become biased as a bull or a bear. Be open minded to what the markets and your signals are saying about the current trend.
  10. Trade only a method you fully understand, and do not piggy back on another trader.