Risk management in practice · Lesson 1 of 3
Sizing from your stop
Derive position size from an account-risk budget and your stop.
8 minute read
Risk budget first, size second
Decide how much of your account one idea can lose, then place the stop where your thesis stops making sense. The position size that connects the two is the output of the calculation, not an input you choose by feel.
Because fees, slippage and any contract multiplier change the realised result, treat the calculated size as an estimate and leave room for the costs that a calculator cannot know in advance.
Key takeaway
Use these concepts to understand the market, not to assume a particular outcome. Always define uncertainty and risk before making a decision.