Daily Drawdown Circuit Breaker

[NYC88]

A circuit breaker is a hard stop on behavior, not a motivational poster.

I've negotiated with myself past a breaker exactly enough times to know the sentence that ends accounts: "one winner to get back to flat." That sentence is banned on my desk. Should be banned on yours.

Define before the open

Code: Select all

MAX_DAILY_LOSS_R = 3R   # or fixed $
MAX_DAILY_LOSS_$ = ____
ACTION = FLATTEN + DISABLE HOTKEYS + WALK

Pick one primary meter. If you use both $ and R, the first one hit wins. No dual-key loopholes.

Implementation

1. Visible meter (sheet, platform plugin, or handwritten tick marks).
2. When hit: cancel all → flatten → physical step away 30+ minutes.
3. No "one winner to get back to flat."
4. Journal code: `DD_BREAKER_HIT`.
5. If the platform allows, disable buy/sell binds after breaker (leave flatten if needed).

Soft warning line

At 70% of max DD: size drops to micro automatically. Write it down so you don't negotiate. Negotiating is the failure mode.

Example day math

Code: Select all

Per-trade risk R = $50
Max daily = 3R = $150
Trade 1: -1R → remaining 2R
Trade 2: -1R → remaining 1R → size already micro by soft rule
Trade 3: -1R → BREAKER → done

If trade 3 "looked perfect," congratulations — you still stop. Doctrine is tested on perfect-looking trades.

Accounts die from unstructured days more often than from one bad idea. This is doctrine.

What's your max daily — R or $ — and is it written before the open?
Soft warning at 70%: do you actually cut to micro?
When you hit the breaker, do you walk or sit and "review" (aka stew)?
Anyone disabled hotkeys after breaker in platform settings — how?

[Fairman]

Circuit breaker as a hard stop on behavior — exactly. The banned sentence on my desk is the same one you named: "one winner to get back to flat."

For stock and ETF scalping I define before the open, in writing:

MAX_DAILY_LOSS_R (or a fixed dollar amount)
ACTION = FLATTEN + DISABLE HOTKEYS + WALK

I also pair it with a 2-loss walk-away at planned R even if the dollar breaker hasn't been hit yet. Two full losses is enough information for one session. The third trade is often cortisol wearing a strategy costume.

Where people quietly break this on equities: they redefine R mid-day, or they count a scratched trade as "not a real loss," or they switch tickers to reset the psychological counter. The meter doesn't care. Write the number where you can see it. Negotiating after you're already red is how breakers become posters.

If the platform allows, disable order hotkeys after the breaker trips. Relying on willpower alone at 10:15 after two losers is not a process.

Diagram: define → hit → flat → walk.