Risk Management
Position sizing, drawdown arithmetic and invalidation — the part of trading that decides whether you are still here in a year.
Part of the course
Risk Management
Position sizing, loss limits and invalidation — the part of trading that decides whether you are still here in a year. Taught before entries, deliberately.
Why Risk Comes First
A 50% drawdown requires a 100% gain to recover. That asymmetry is why risk management is not the defensive part of trading — it is the part that determines whether any edge you have ever gets to compound.
8 min read
Position Sizing Explained
Position size is derived, not chosen. Once you fix a risk percentage and a stop level, the number of units is arithmetic — and any deviation from it is a decision to take more risk than you said you would.
9 min read
Stop-Losses and Invalidation
A stop belongs where your idea stops being true, not where your discomfort starts. Placing it by feel converts a defined risk into an arbitrary one and guarantees you are stopped out by noise.
8 min read
Risk of Ruin and Drawdown Maths
Returns multiply rather than add, so a drawdown costs more to undo than it cost to create. Combine that with ordinary losing streaks and you get risk of ruin — the probability that normal variance, not bad analysis, ends the account.
13 min read
Risk/Reward and Expectancy
An R-multiple expresses every outcome as a multiple of what you risked. Once results are in R, any reward-to-risk ratio implies a break-even win rate, and expectancy tells you the average — never the next trade.
9 min read
Correlation and Portfolio Risk
Five positions risking 1% each are only five separate risks if they can lose on different days. When they share a driver, they are one 5% position wearing five tickers — and the sizing spreadsheet will never mention it.
9 min read