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Clear filtersPosition Sizing
How much to trade is a separate decision from what to trade, and it is the one that determines whether a losing run is survivable.
Stop Losses: Types and Placement
A stop is a decision made in advance about when a position is wrong. Where it sits should follow from the structure of the chart rather than from a preferred dollar amount.
Risk and Reward
The distance to a target divided by the distance to a stop. Useful for comparing opportunities, and meaningless without a realistic probability attached.
Diversification and Correlation
Diversification only works to the extent holdings move differently. Counting positions is not the measure; correlation is.
Drawdown and the Arithmetic of Recovery
Losses and the gains needed to recover them are not symmetric, and the asymmetry gets rapidly worse. This single table is the argument for every risk control there is.
Expectancy and Win Rate
Win rate on its own says nothing. Expectancy combines it with the sizes of wins and losses to give the average result per trade, which is the number that decides everything.
Liquidity and Slippage
The gap between the price on the screen and the price actually filled. In thin securities it is frequently larger than the edge the strategy was pursuing.
The Real Cost of Trading
Commission is usually the smallest cost and the only visible one. The spread, the slippage and the tax treatment are larger and mostly invisible.
Writing the Plan Down
A plan that exists only in your head changes to accommodate whatever you want to do. Writing it down is what makes it a constraint rather than a preference.
The Kelly Criterion
A formula for the position size that maximises long-run growth. Mathematically clean, extremely sensitive to inputs nobody knows, and almost never used at full size.
Scaling In and Out
Building or reducing a position in pieces rather than at once. It changes the distribution of outcomes and it is frequently confused with averaging down.
Hedging
Taking an offsetting position to reduce an exposure. Every hedge costs something, and the cost is frequently less visible than the risk it removes.
Portfolio Heat
The total amount at risk across every open position at once. Individually sensible positions can add to an exposure nobody chose.
Tail Risk
The rare, large losses that dominate long-run outcomes. Standard risk measures are built on a distribution that understates exactly these events.
Correlation Between Strategies
Running several methods at once diversifies only to the extent they fail at different times. Most methods within one style fail together.