Grade 4 of 10
Risk Camp
How to protect your account before you learn a single strategy. The same risk math works in every market.
9 lessons · about 25 minutes · Badge: Risk Keeper
After this grade you can
- Pick how much you could lose on one trade
- Size a position so a loss stays small
- Place a stop loss with a reason
- See why a big loss is so hard to win back
Lessons
Risk Management Math
- 1The R-multipleExplain what 1R, 2R, and 3R mean in plain dollar terms.3 min
- 2The position sizing formulaCalculate position size from account, risk percent, stop distance, and pip value.3 min
- 3Expectancy mathCalculate the expected dollar value of a trading system from winrate, average win, and average loss.3 min
- 4Gambler's ruin applied to tradingExplain why an under-capitalized trader can lose even with a positive edge.3 min
- 5Drawdown recovery mathCalculate the return required to recover from a given drawdown.3 min
- 6Kelly criterion intuitionDerive a sensible per-trade risk from winrate and reward-to-risk using the Kelly framework.3 min
- 7Sharpe ratio intuition for retailInterpret the Sharpe ratio as a risk-adjusted return measure relevant to retail trading.3 min
- 8Max consecutive losers in any systemEstimate the longest expected losing streak from a system's winrate and trade sample.3 min
- 9Why pros risk 0.5 to 1 percent, not 5Justify the 0.5 to 1 percent per-trade risk rule from streak, drawdown, and ruin math.3 min
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Demo first. Trading has risk of loss. Education, not financial advice.