Position Sizing & Risk

Most traders obsess over entries and ignore the one variable that actually decides survival: how much they risk per trade. This short course fixes that. It builds, from first principles, the habit of sizing every position to a small, fixed risk — so no single trade, and no losing streak, can take you out.

I Why this is the master skill

Survival first

• CONCEPTRisk & position sizing — the most important skill in trading, from first principles.
• CONCEPTRisk of ruin & expectancy — why how much you bet matters more than how often you're right.

II The math you actually need

R-multiples, the 1% rule & expectancy

Everything reduces to three ideas: define 1R (entry minus stop), risk a small fixed fraction (often ≤1–2%) so a string of losses can't end you, and measure your edge as expectancy in R.

• CONCEPTThe sizing formula, worked step by step.
• CONCEPTExpectancy & the ruin curve.

III Sizing to volatility

Let the market set the stop

• CONCEPTATR & volatility — size so a fixed dollar risk equals a chosen ATR multiple, so quiet markets earn larger size and wild ones smaller.
• CONCEPTKeltner & Supertrend — ATR-based stops in practice.

IV Put it to work

Apply it to every trade

Sizing isn't a separate activity — it's the last step of every setup. Each strategy playbook on this site defines 1R and sizes from it; log every result in R in your journal so your expectancy becomes a measured number, not a guess.