Risk & Position Sizing

Surviving is the whole game

You can read candles perfectly and still lose everything, because reading price tells you what might happen — not how much to risk on it. Risk management is what separates people who last from people who blow up. It matters more than any pattern in this course.

Four ideas carry almost all of the weight:

• The stop-loss — before entering, decide the exact price at which you were wrong. That is your invalidation point. If you cannot define it, you are not ready to act.
• Risk per trade — never risk more than a small, fixed fraction of your capital on any single trade. Many disciplined participants use around 1–2%. The exact figure matters less than that it is small and consistent, so that no one trade — and no losing streak — can ruin you.
• Position sizing — this is how you enforce the rule. Your position size is not "how confident am I?" It is arithmetic: position size = (capital × risk %) ÷ (entry − stop) . A wider stop means a smaller position, so that the rupees at risk stay the same.
• Reward vs risk — measure potential reward against the risk you are taking (in "R", where 1R is your stop distance). A setup risking 1R to make 2R can be worthwhile even if it is wrong half the time; a setup risking 3R to make 1R is a slow way to lose.