Management
Management
Lesson 9 : Risk Management
Lesson 9 : Risk Management
Lesson 9 : Risk Management
Advanced
Advanced
Advanced
5 min
5 min
5 min
Risk Options
Risk Options
Risk Options
Risk management can remain simple. A baseline dollar risk per trade is calculated according to the trading approach and performance, and that amount is applied consistently across trades. Alongside this, maximum daily loss limits are set to cap downside risk. From this foundation, risk management can be expanded into more dynamic approaches compared to a purely static model.
Risk management can remain simple. A baseline dollar risk per trade is calculated according to the trading approach and performance, and that amount is applied consistently across trades. Alongside this, maximum daily loss limits are set to cap downside risk. From this foundation, risk management can be expanded into more dynamic approaches compared to a purely static model.
Risk management can remain simple. A baseline dollar risk per trade is calculated according to the trading approach and performance, and that amount is applied consistently across trades. Alongside this, maximum daily loss limits are set to cap downside risk. From this foundation, risk management can be expanded into more dynamic approaches compared to a purely static model.
Dynamic risk management is not a requirement. Maintaining a fixed dollar risk per trade across all opportunities can be sufficient for success. Risk management is a process that evolves with experience and discretion, and the more dynamic elements should only be introduced once that foundation is firmly established.
Dynamic risk management is not a requirement. Maintaining a fixed dollar risk per trade across all opportunities can be sufficient for success. Risk management is a process that evolves with experience and discretion, and the more dynamic elements should only be introduced once that foundation is firmly established.
Dynamic risk management is not a requirement. Maintaining a fixed dollar risk per trade across all opportunities can be sufficient for success. Risk management is a process that evolves with experience and discretion, and the more dynamic elements should only be introduced once that foundation is firmly established.
Conviction-Based Sizing
Conviction-Based Sizing
Conviction-Based Sizing
With experience, a subconscious understanding of the probability within trade setups begins to develop. A baseline standard defines what is valid for execution, yet every setup will vary in quality and probability. This variance can be incorporated into risk management in multiple ways.
With experience, a subconscious understanding of the probability within trade setups begins to develop. A baseline standard defines what is valid for execution, yet every setup will vary in quality and probability. This variance can be incorporated into risk management in multiple ways.
With experience, a subconscious understanding of the probability within trade setups begins to develop. A baseline standard defines what is valid for execution, yet every setup will vary in quality and probability. This variance can be incorporated into risk management in multiple ways.
Journaling often reveals that certain setups with strong conviction show increased win rates and improved outcomes. When opportunities meet above-average quality across each step of the model, position size can be set slightly higher than average. This adjustment is not excessive leverage, since no individual trade outcome is guaranteed. It is a controlled increase, fractionally larger than the standard baseline dollar risk, designed to maximize upside when the market presents the highest-quality conditions.
Journaling often reveals that certain setups with strong conviction show increased win rates and improved outcomes. When opportunities meet above-average quality across each step of the model, position size can be set slightly higher than average. This adjustment is not excessive leverage, since no individual trade outcome is guaranteed. It is a controlled increase, fractionally larger than the standard baseline dollar risk, designed to maximize upside when the market presents the highest-quality conditions.
Journaling often reveals that certain setups with strong conviction show increased win rates and improved outcomes. When opportunities meet above-average quality across each step of the model, position size can be set slightly higher than average. This adjustment is not excessive leverage, since no individual trade outcome is guaranteed. It is a controlled increase, fractionally larger than the standard baseline dollar risk, designed to maximize upside when the market presents the highest-quality conditions.
On the other side, some setups may still qualify for execution but carry limited expectation. In these cases, two options exist. Risk can be placed at or slightly below the standard per-trade amount, maintaining a consistent quality threshold for trades that deserve baseline exposure. Alternatively, a partial entry can be placed with the intent to add once the trade begins to move favorably. Scaling into positions requires greater technical skill but offers a careful way to manage risk when expectations are reduced.
On the other side, some setups may still qualify for execution but carry limited expectation. In these cases, two options exist. Risk can be placed at or slightly below the standard per-trade amount, maintaining a consistent quality threshold for trades that deserve baseline exposure. Alternatively, a partial entry can be placed with the intent to add once the trade begins to move favorably. Scaling into positions requires greater technical skill but offers a careful way to manage risk when expectations are reduced.
On the other side, some setups may still qualify for execution but carry limited expectation. In these cases, two options exist. Risk can be placed at or slightly below the standard per-trade amount, maintaining a consistent quality threshold for trades that deserve baseline exposure. Alternatively, a partial entry can be placed with the intent to add once the trade begins to move favorably. Scaling into positions requires greater technical skill but offers a careful way to manage risk when expectations are reduced.
Maximum Daily Loss
Never take more than two losses in a single day. This is a non-negotiable rule that must be followed whenever trades are executed. Even on days where every condition aligns, the market will not always deliver the expected move. This rule accounts for those situations and ensures capital remains protected with downside capped. Two consecutive losses under the Expansion Model are also a strong signal that the read on the day is likely incorrect, and further attempts should be avoided.
Never take more than two losses in a single day. This is a non-negotiable rule that must be followed whenever trades are executed. Even on days where every condition aligns, the market will not always deliver the expected move. This rule accounts for those situations and ensures capital remains protected with downside capped. Two consecutive losses under the Expansion Model are also a strong signal that the read on the day is likely incorrect, and further attempts should be avoided.
Never take more than two losses in a single day. This is a non-negotiable rule that must be followed whenever trades are executed. Even on days where every condition aligns, the market will not always deliver the expected move. This rule accounts for those situations and ensures capital remains protected with downside capped. Two consecutive losses under the Expansion Model are also a strong signal that the read on the day is likely incorrect, and further attempts should be avoided.
The standard for trading education and guidance
2025 The Market Lens - All Rights Reserved
The standard for trading education and guidance
2025 The Market Lens - All Rights Reserved
The standard for trading education and guidance
2025 The Market Lens - All Rights Reserved
The standard for trading education and guidance