Its just a fancy name for saying, i stop trading for the session after 1 loss.
In addition, I stop trading for the session after 2 wins.
With this rule in place, I have limited the possible outcomes when trading each session.
I usually aim for a minimum of 3R per trade, so let’s use that in our permutation.
Scenario 1
1 Loss = -1R
Scenario 2
1 win = +3R
1 Loss = -1R
Total R = +2R
Scenario 3
1 win = +3R
Another win = +3R
Total R for = +6R
Summary
Employing a 1 loss rule in your trading system, allows you the confidence of knowing, you only have 3 outcomes when you enter a new trading session. A small loss, a small win or a big win.
