Glossary · reference sheet · Risk & Sizing
Risk Rules
Sizing, stops, expectancy and drawdown — the survival card.
Sizing
- 1% ruleRisk ≤1% of capital per trade (0.5–2% range by style).
- FormulaShares = (capital × risk%) ÷ (entry − stop).
- Streak mathTen 1% losses ≈ −9.6%; ten 5% losses ≈ −40%.
Stops
- Structure firstStop at thesis invalidation, not arbitrary percent.
- ATR checkKeep ≥ ~1.5–2× ATR from entry for your timeframe.
- Gap honestyStops fill at gap prices — size covers what orders cannot.
Expectancy
- FormulaE = W×avgWin − L×avgLoss (in R). Positive E = edge.
- Recovery tax−20% needs +25%; −50% needs +100%.
- Design goalWorst realistic streak stays inside your holdable drawdown.
How to use this sheet
Read a row as a claim, not a fact: the term, what it means, and the condition that makes it matter. Each term has its own page, and the lessons it belongs to are linked from there.
Learn content is for education only — not individualized financial advice, a recommendation, or a solicitation to buy or sell any security. Options involve substantial risk. Examples are simplified and historical patterns never guarantee future results.