How do my friend and I manage losses trading spreads?
I have a joint account with a buddy. Usually trade one spread a day (iron condor, put, or credit spread usually). Usually we go 1 or 2 weeks making $50 to $100 dollars a day, and then we get a loss that wipes out all gains or, like in the case of that huge drop on QQQ a few fridays ago, we lost nearly half the account. The account was 11K, and with that loss, it's down to 6 K.
My friend is the main executor, while I continue adding money to the account from other sources of income. So I see that he's lost us 5K am an incensed. So, we talked and determined to set a stop loss. For our account size? Not sure what the stop loss should be, so we said about $200. So another couple of weeks go by and we make our usual daily gains and then yesterday I see we lose $800 on another spread. He told me he had moved the stop to $500 for leeway.
I said, "I thought we had a $200 stop?". And he said "from now on, very strict" etc etc.
But I am monitoring our progress. Usually we only go into the red on these spreads anywhere from 40-50 bucks at the MOST and then end up green on those winning days. Keep in mind our account size is 6K.
Is it hard for a spread trader to set a stop loss? I am thinking, "dude just get out at $200 in the red, what's so hard?" but it clearly is hard. And I am doubting his ability to manage our losses, which usually happen on a Friday and are 10% or more of the account lost (we've had 3 major losses now in 2.5 months, $800, $5k, and now $800 again.
If you are experienced with loss management in spread trading please give me some advice on how to minimize these horrible losses. Is it a matter of just setting a stop loss and sticking to it? Please let me know what we can do to improve on this matter, and I'll be very grateful!