65-Day Academy · Day 29 · Risk & Position Sizing
Invested vs At-Risk — the Beginner's Blur
Two different numbers
Invested: cash tied up ($16,000 above). At-risk: the loss if wrong ($800 above). The ratio between them is the stop distance. Beginners who think "I can only buy $500 of stock" end up with random risk: a $500 position with a 20% stop risks $100 (0.125% — timid), while a $500 position with a 2% stop risks $10... or with no stop at all, risks everything.
The corollary
Widening a stop to "give it room" multiplies risk silently: moving the $10 stop to $20 on the same 80 shares doubles the risk to $1,600 — 2% of the account — without any new decision to risk more. Stops are chosen BEFORE entry, and moving them must be a NEW, explicit risk decision (never mid-trade emotion).
What you'll practise
True or false: if you invest $10,000 with a stop 5% below entry, your risk is $500 regardless of account size.
10 XP in the app · introductory
Sources
- Stop-Loss OrderInvestopedia
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All lessons are for educational purposes only and are not individualized financial advice, a recommendation, or a solicitation to buy or sell any security. Options involve substantial risk and are not suitable for every investor.