Unit 2 · Level 2 · Risk Management
Why traders die: sizing
Hear this clearly: most traders don't fail because they pick wrong. They fail because they bet too BIG on any single idea. Position sizing (how much you risk per trade) matters more than every chart pattern combined.
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What this lesson covers
The brutal math of losses
Lose 10%, you need +11% to recover. Lose 50%, you need +100%. Lose 90%, you need +900%. Losses hurt more than gains help, which is why protecting downside IS the strategy.
What you get asked
Two traders are right 50% of the time. Ana risks 2% per trade, Bob risks 25%. A normal losing streak of 4 hits both. Who's in trouble?
Ana is down ~8%: annoying, survivable. Bob needs a +215% run to recover. Same skill, same luck. Sizing was the whole difference.
Match the loss to the gain needed to recover
This asymmetry is why 'don't blow up' beats 'get rich' as a strategy. Survival compounds.
The percentage of your account you could lose on one trade is called your ___ per trade.
Risk per trade = (entry − stop) × size. You CHOOSE this number before entering. Choosing it is what makes you a trader instead of a gambler.
Your account is €5,000 and you decide to risk 2% on one trade. How many euros are you allowed to lose if the stop hits?
€5,000 × 0.02 = €100. Sizing always starts from the LOSS you accept, never from the win you hope for.
Formi's honest question: which loses more accounts?
Ordinary bad luck is GUARANTEED; every strategy has losing streaks. Sizing decides whether streaks are bruises or funerals. 🐜
The rest of this unit
Position sizing, the 1% rule, risk:reward, and defeating your own brain. The unit that keeps accounts alive.