Market Recap July 8th – The Hidden Risk Management Trap

Hi there, welcome back to my prop firm challenge – this is the recap of Trading Day 25 with my funded performance account.

🔍 Summary: Yesterday's trading session brought me one thing above all: An eye-opening moment. I realized that while I’ve been talking a lot about risk management, I still haven’t fully figured it out. Looking at my overall account performance, I noticed that I’ve been risking too much per day. That was the reason why I reduced my daily risk afterwards. But now I’ve discovered the next step: I also need to adjust my risk per trade by adapting my position size. Yesterday I took three trades:

One break-even
Two losing trades

But the third trade had the potential to turn the day green — if my position sizing and stop were aligned. Let’s break down the market first and then go into the detail of what went wrong.

📊 Market Context: In the pre-session, I noticed a small buying imbalance and the market was running above the daily VWAP. We were clearly in a stable long environment, above the previous week's midpoint. A pullback to regain strength before continuing higher would’ve been healthy. Heading into the open, the market was in balance — range-bound with two possibilities:

Breakout to the upside
Breakout to the downside

But in the bigger picture, the context remained bullish.

⚠️ The Risk Management Trap: Right now, I’m trading the Micro ES Futures and had to cut my position size due to my losing steak. My PA account is close to crashing, and every decision matters. Yesterday, I took a third trade that was beautifully planned, but failed because of one major mistake. I’ve always believed: “My Risk to Reward Ratio is 1:2 minimum. That’s safe.” “I’m risking 16 ticks, targeting 32. Sounds good.” But here’s what I overlooked:

📉 16 ticks with 5 micros = $100 risk

💸 And $100 is my daily loss limit!

So if I already lost $50 earlier in the day, I can’t just take another full-size trade with the same 16-tick stop. What I did instead was tighten my stop to 8–10 ticks, hoping the trade would work.

🚫 But the trade setup needed more room.

🚫 So I got stopped out — again — not because the idea was wrong, but because the execution was flawed. And here’s the big shift in my thinking:

I should not shrink my stop to fit my daily risk. I should shrink my position size to fit the proper stop! It sounds simple. I'm aware of it but it keeps happening unconsciously. This undetected error on my part has cost me a lot of trades and money in the past. This recap helped me uncover this hidden flaw in my approach, and I’m determined to correct it moving forward.

🧠 Final Thoughts: That was my recap for yesterday —A tough but incredibly valuable lesson on real risk management.

🎯 What do you think about my decision-making?

🎯 Have you ever miscalculated your risk this way?

Let’s talk in the comments below 👇 And if you enjoyed this post, I’d appreciate a like or your feedback.

Thanks for being part of this journey.

Nicolas

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