RULE NO. 4: Five (5) maximum open trades at any point in time

‘Stop Loss’: With five maximum open trades at any point in time and your stop loss set at 200 pips, where the almost impossible happens and the market run against your five stop losses got hit, you maximum loss will only be 1000. For illustrative purpose, let us look at effect of 1000 pips loss on our hypothetical 3 traders on the table below. It is obvious that Trade1 can will never survive such a loss even with one open trade, while Trade2 can will not survive where he has up to 3 trades open, but Trader3 loss is only a mere $100 or 20% of his accounts.

You may want to ask if it is possible for market to move at such a rate. It is quite possible. GBPJPY recent fall 152.69 to 139.47 i.e. a fall of over 1,200 pips within a week, the last leg of the fall 400 pips occurred within 4 hours. Also EURUSD fail from its height of 1.5171 to 1.4191 i.e. a fall of over 1000 pips.

The Holy Grail Trader will survive any loss and have the fund to ride the market back on its way up or down and into profitability. How many traders can survive a loss of 1000 pips?