Risk management · Lesson 10
Position sizing
A wider stop changes the meaning of the same position size.
Position sizing links account risk to trade structure. A wider stop generally requires a smaller position for the same planned monetary risk, while a tighter stop permits a larger position only if the tighter invalidation is technically justified. Leverage changes margin requirements and exposure mechanics, but it should not be used to bypass the original risk limit.
Imagine the distance to invalidation widens while the risk budget stays fixed. Position size must respond to that distance rather than being chosen independently.
Explain how a change in stop distance affects size when the planned risk budget is unchanged. Include fees and execution uncertainty.
Next in this series: Risk-reward and expectancy.
#TradingEducation #PriceAction #RiskManagement #TradingTurtle
Position sizing
A wider stop changes the meaning of the same position size.
Position sizing links account risk to trade structure. A wider stop generally requires a smaller position for the same planned monetary risk, while a tighter stop permits a larger position only if the tighter invalidation is technically justified. Leverage changes margin requirements and exposure mechanics, but it should not be used to bypass the original risk limit.
Imagine the distance to invalidation widens while the risk budget stays fixed. Position size must respond to that distance rather than being chosen independently.
Explain how a change in stop distance affects size when the planned risk budget is unchanged. Include fees and execution uncertainty.
Next in this series: Risk-reward and expectancy.
#TradingEducation #PriceAction #RiskManagement #TradingTurtle
