Risk Management Cheat Sheet
The specific rules that separate traders who survive from traders who blow up.
Quick reference table
| Per-trade risk | 0.5%-2% of account max |
| Per-day loss limit | 2-3% of account — stop trading after |
| Per-week loss limit | 5% of account — pause and review |
| Position sizing formula | Shares = (Account × Risk%) / Stop distance |
| Stop placement | Based on chart structure, NOT 'how much I can afford' |
| Stop discipline | Set BEFORE entry, never move further away once set |
| Move stop to break-even | After +1R profit |
| Max correlation exposure | 20-25% per sector |
| Reserve cash | 20% of account always |
| After 3 losses in row | Cut size by 50% until back to profitable |
Quick setups
- Before every trade: calculate exact position size with the formula. Don't eyeball. Use our position size calculator.
- After every trade: log entry, stop, exit, R-multiple, notes. Without a journal, improvement is random.
- Weekly: calculate win rate, average R-multiple, total expectancy. If negative for 4+ weeks, stop and review strategy.