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Clear filtersPosition Sizing
Position sizing is choosing how many shares to trade so that a stopped-out trade loses a fixed, chosen amount. It is separate from what to trade, and it decides whether a losing run is survivable.
Stop Losses: Types and Placement
A stop loss is a price set in advance at which a position is closed because the reason for it no longer holds. Where it sits should follow from the chart's structure rather than a preferred dollar amount.
Risk and Reward
The risk-reward ratio is the distance to a target divided by the distance to a stop. It is useful for comparing opportunities, and meaningless without a realistic probability of reaching each.
Drawdown and the Arithmetic of Recovery
A drawdown is the fall from a peak to a later low. Recovering takes a larger gain than the loss (a 50 percent loss needs a 100 percent gain), and the asymmetry worsens quickly as losses deepen.
Writing the Plan Down
A trading plan is a written set of rules for entries, exits, position size and account limits. A plan held only in memory changes to fit whatever is tempting; writing it down makes it a constraint.
Day Trading, Swing Trading and Position Trading
Day trading opens and closes a position within one session, swing trading holds for days to weeks and position trading for months. The holding period decides which risks, costs and rules apply.