I was reading my usual diet of blogs when I chanced upon OT's comments on this article, regarding Elder's rules in his sell and sell short book. It mentioned that there are two important rules to follow when trading: 1. Limit your loss on any trade to 2% of the equity in your trading account 2. Whenever the value of your account dips below 6% of the closing value at the end of last month, stop trading for the rest of the month. The 2% / 6% rules are designed to prevent two kinds of ways that the market can kill you. I've written about piranha bites and shark bites before here, and the idea behind these two rules are based on these two ways too. The first way that the market can kill you is to kill you quickly and taking a big chunk of your capital ......