Define risk per trade, stop loss planning, and position sizing.
Definition
Market intelligence means making decisions with data, context, and risk rules. Not with hype or fear.
Risk per trade
Decide the maximum you can lose on one trade. Many disciplined traders use 0.5 to 2 percent of account size. The exact number depends on your goals and volatility.
Position sizing in one sentence
Position size = Risk amount divided by distance to stop. If your stop is far, size smaller. If your stop is close, size can be larger.
Definition
Stop loss is the price where your trade idea is proven wrong. Not the price where you feel uncomfortable.
Common risk mistakes
- Moving the stop because you hope.
- Using the same size on every trade.
- Risking more after a losing streak.
Tip
Write your risk rule down. Follow it for 30 trades before you change anything.
Quick quiz
- What is risk per trade.
- How does stop distance affect position size.
- Why should a stop represent invalidation.