By Darrell Martin
Whether you are a new or seasoned trader, sometimes it can be hard to differentiate between all the rules and guidelines you read about on the forum. The system you are trading may tell you to follow certain rules for your stops that don’t seem to correspond to the risk management rules you have pounded into your head to protect your account. This happened recently to a trader we’ll call Trader X. Several traders responded to help this trader understand the path to follow. We’ll group them together and call them THT: Traders Helping Traders, because that is what happens here at Apex Investing!
Trader X: I’m trying to have good risk management while trading IZSS, but I’m trading with a small account and get kicked out quickly every day. I’m missing the big moves. I’m getting frustrated with trading as this keeps happening day after day. I’m using the 5%/6 rule which means I’m stopped out a lot sooner than if I were to use the MVP stops. However, if I stick to the MVP stops, I’m breaking the 5% rule. What am I supposed to do?
THT: I think you are confusing some of the rules, which is easy to do. The 5%/6 rule determines the size of contract you should be trading and not where you should be placing your stop. This [article][1] might help you better understand how to implement this rule. You’ve got to let the chart determine your stop, not your risk. Risk determines the size. If you are using the 5%/6 rule for your stops, most of the times your stop is going to be a lot less that the stops at MVP, which will force you out of the trade early.
Trader X: But I only have $1000 in my Nadex account. If I follow the 5%/6 rule, I can only lose $50 today, divided by six trades means I can only lose $8 per IZSS trade. My stop will be eight-ticks as opposed to the 25-tick stop following MVP rules. If I follow the regular IZSS rules and get stopped out twice, I’ll be down 5% and I’m done for the day. I don’t see how I will ever be able to trade long enough to get in a big trend trade!
THT: By mixing up the rules, you know you’re not following the rules, right? You probably feel that you’re following the one that will give you the most trades.
Trader X: Maybe I should just change to Alchemy. It seems to have quicker, tighter stops.
THT: I think it’s better you master one system before you undertake another one. The first thing you’ve got to do is realize you are breaking the rules. When trading, it is never a good idea to break the rules. When you break the rules or mix things up, you feel like a loser and that is not a good feeling!
Trader X: I know. 
This brings me back to my original question: What am I supposed to do?
THT: The way I see it, as long as you have only $1000 in your Nadex account, you can’t trade spreads unless you risk more than 5%. You would need to increase your account size to at least $2500. Until that time, you could trade micro fx. It comes down to three choices: More money, More risk (percentage), or Lower tick value.
Trader X: Lower tick value? You didn’t mention that before.
THT: If you trade micro fx, it has a lower tick value. There are also lower ticking instruments Nadex like copper, silver, FTSE and DAX. They tick larger than the underlying, so the Nadex tick value is small. This will help you as you trade IZSS because we base our stops on underlying ticks.
Trader X: Anything else?
THT: Yes, remember that trading is like a balloon. You can squeeze it all you want. The air is going to go somewhere else in the balloon or it will pop. Follow the rules exactly so that your account doesn’t pop! One more thing, this post might help you understand how using the MVP stops help your trading. The marked-up-charts make it a little easier to understand. The chart determines your stop. The risk doesn’t determine where you place your stop. Risk determines the size or number of contracts you can place. Happy trading! 
[1]: Risk Management And Placing Stops: How They Relate