Position sizing, drawdowns, expectancy, the Kelly criterion, the odds of losing streaks, and the traps your brain sets for you: survive long enough to make money.
For: learners who have started trading and want to control risk systematically and break bad habits
This course uses ideas from the courses below (optional; you can start right away).
How much you buy isn't about how much is in your account; it's about where your stop is. Decide the most you'll lose first, then work back to the position size.
Going from $100 to $50 is a 50% loss, but getting from $50 back to $100 takes a 100% gain. The deeper the loss, the harder the climb out.
A 40% win rate can make money, and an 80% win rate can still blow up. What decides the outcome is win rate combined with payoff ratio.
The same profitable strategy can produce wildly different equity curves with different luck. Use a Monte Carlo simulation to run hundreds of possible futures and see how bad it can get.
Bet too little and your money grows slowly; bet too much and volatility drags you down. The Kelly criterion finds the bet size that grows wealth fastest over the long run.
Losing $100 hurts about twice as much as winning $100 feels good. That imbalance is exactly what makes people cut their winners and cling to their losers.
Record the reason, emotions and result of every trade. After a few dozen trades, the data will tell you which setups really make money and when you're most likely to make mistakes.
A stop that's too close gets swept by everyday noise; too far and your position gets tiny. Place the stop by volatility (ATR) or chart structure, then use position size to fix the risk at 1%.
Risk 1% per trade and hold 8 at once, and that's 8%. If those positions are highly correlated, they'll hit their stops together: diversified on the surface, one big position underneath.