What is Capital Preservation?

What is Capital Preservation?

Capital preservation is a defensive mindset that prioritizes protecting trading capital over aggressive growth. Traders who preserve capital can stay in the game long enough to exploit high-quality opportunities.

Core Principles

• Position sizing: Risk only a small percentage per trade.
• Stop-loss discipline: Predefine exits and honor them.
• Diversification: Spread exposure across strategies and timeframes.
• Drawdown control: Set hard limits for daily, weekly, and monthly losses.

Practical Actions

• Trade filtering: Skip marginal setups rather than forcing trades.
• Hedging tools: Offset exposure with options or correlated pairs when volatility rises.
• Performance reviews: Audit systems regularly to remove underperforming rules.
• Emergency plans: Plan for platform outages and broker issues before they happen.

Practical Playbook

• Define context on higher timeframes, then execute on intraday charts.
• Wait for confirmation (acceptance, momentum, or confluence) before entry.
• Size positions conservatively and place stops at clear invalidation levels.
• Adapt to session dynamics; conditions shift between Asia, London, and New York.

Common Pitfalls

• Forcing trades without alignment across timeframe, structure, and catalyst.
• Ignoring spreads/slippage during news or thin liquidity.
• Moving stops or adding to losers instead of honoring the plan.

Illustrative Example

Build a simple playbook: identify bias, mark key zones/levels, define triggers and invalidation, and pre‑set targets for 2–3R. Journal results by session and setup to refine rules. Over time, consistency—not prediction—drives outcomes.

Practical Playbook

• Define context on higher timeframes, then execute on intraday charts.
• Wait for confirmation (acceptance, momentum, or confluence) before entry.
• Size positions conservatively and place stops at clear invalidation levels.
• Adapt to session dynamics; conditions shift between Asia, London, and New York.

Common Pitfalls

• Forcing trades without alignment across timeframe, structure, and catalyst.
• Ignoring spreads/slippage during news or thin liquidity.
• Moving stops or adding to losers instead of honoring the plan.

Illustrative Example

Build a simple playbook: identify bias, mark key zones/levels, define triggers and invalidation, and pre‑set targets for 2–3R. Journal results by session and setup to refine rules. Over time, consistency—not prediction—drives outcomes.