This refers to the maximum amount of pain, as defined by the size of a paper loss, that a trader is willing to incur before he gets out of a trading position. In other words, it is the point at which a trader is unwilling to incur any further losses and decides to throw in the towel and get out of his trade. Traders are advised to clearly define their uncle point before entering a trade in order to cut their losses quickly, thereby avoiding situations where they are locked in with unbearable amounts of losses. It originates from the American expression “Say ‘uncle’!”, wherein an opponent in a battle is forced to utter the expression as a mark of surrender to his opponent.
