The arithmetic of trading risk
Short guides on the part of trading you control: how much you risk, when you stop, and what you write down. Each one is a single question, the sum that answers it, and the tool that does the sum for you.
How many shares? Size the trade from the stop
Work out the share count from the dollars you are willing to lose and where your stop is, then check it against a cap on position size.
Will your strategy survive a prop evaluation?
Put the account's loss room and your strategy's worst drawdown in the same unit. If the drawdown is bigger than the room, the account fails while the strategy works as tested.
The consistency rule in one sum
Why one big day can block a payout, how much total profit you need after it, and how to stop it happening again.
A daily loss limit that holds
A limit you can change while you are losing is not a limit. Three parts that make one hold, and where a tool can and cannot help.
How long a losing streak to expect, by win rate
A table of the losing streak to expect over 200 trades at each win rate, and what that streak costs at different risk per trade.
Five journal columns that are enough
What to record on every trade, why the result goes in R and not dollars, and the one comparison that makes a journal worth keeping.
What you will not find here
- Stock or coin picks, price targets or signals.
- Claims that a method or this tool makes money.
- Made-up track records. Examples use round numbers and are labelled as examples.
These articles are education, not financial advice, and nothing here is a recommendation to buy or sell anything. The examples are illustrations of arithmetic. Stops can fill worse than planned, and trading involves risk of loss. See the risk disclaimer.