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Coach's Playbook Posted by Team Topstep June 16, 2022

Capital Preservation - The Most Important Thing Traders Do

Aside from making good trades, the most important thing a trader can do is preserve capital, ensuring they have enough money in their account to trade another day. This week, the Topstep coaches discuss the importance of proper risk management and offer some advice on how to keep some powder dry for tomorrow.

Funded Trader Shoutout

If you’ve been trading the equity markets recently, you probably know that it’s not for the faint of heart. The E-Mini Nasdaq-100 (NQ) futures tanked more than 1600 points over three trading sessions, and volatility doesn’t look like it wants to ease off. So this week, we are tipping our hats to funded trader Luis L. for holding on for a ride and adding $5,300 to his funded account balance. Way to go, Luis!

Capital Preservation

Would you ever go fishing without bringing an extra supply of hooks with you? Even the best anglers lose a hook from time to time. It’s inevitable. Try to picture it; after spending hours putting your gear together and hauling it out to your favorite fishing spot, you lose your only hook on the first nibble of the day. Now, what do you do? Your choices are dwindling, and fishing is no longer an option. So now, try to relate the same scenario to your trading account.

You did all that work preparing for the trading day, but you overlooked one of the most critical factors; your account size. And now, after one losing trade, you’re done for the day. The worst part is, when you see another good trade setting up, there’s nothing you’ll be able to do but watch. 

So, the question now becomes, how do you prevent a situation like this from ever occurring? Well, the answer is; responsible risk management and capital preservation. Capital preservation is your best tool for making money. Proper money management will keep equity in your account and allow you to trade again tomorrow.

Pay close attention to what the Topstep coaches say in this video. They’ve lived through these experiences and know that when you run out of money, the game is over.

Trade Well!