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Risk Management & Trading Psychology
Risk per trade and position sizing, R-multiples and expectancy, drawdowns and risk of ruin, stops and slippage, journaling, cognitive biases and a rules-based process.
- 01
Risk per trade and position sizing
Decide how much you are willing to lose before deciding how much to buy. Size follows from risk, never the other way round.
10 min
- 02
R-multiples and expectancy
Measure every outcome in units of initial risk (R). Expectancy tells you what a method earns per unit of risk — if your sample is honest.
11 min
- 03
Drawdowns, losing streaks and risk of ruin
Losses compound against you asymmetrically, and long losing streaks are normal even for a positive-expectancy method.
11 min
- 04
Stop placement, gaps and slippage
A stop is a plan, not a guarantee. Place it where the idea is wrong, then budget for fills that are worse than planned.
10 min
- 05
Journaling and trade review
A journal turns trades into data. Review process quality separately from outcome quality.
9 min
- 06
Cognitive biases that cost traders
Loss aversion, confirmation bias, recency and overconfidence are predictable. Rules exist to outvote them.
10 min
- 07
Building a rules-based process
Combine sizing, limits, a checklist and a review loop into a written plan you can follow on a bad day.
10 min