Risk

Losses and gains are not symmetric. A 10% drop needs about 11% to recover. A 25% drop needs 33%. A 50% drop needs 100%. A 75% drop needs 300%. The deeper the hole, the less the next good idea can help.

That is why “I’ll make it back on the next one” is an arithmetic error, not a mindset. The job of risk is to keep any single idea from putting you in a hole your process cannot climb.

Leverage does not create an edge. It multiplies the distance to the hole. A 10% adverse move on five-times leverage is a 50% hit to equity, and then you need a double just to be even — if you were not liquidated first.

Pick a fraction of equity you are willing to lose when you are wrong — many careful desks use a half percent to one percent. Then locate the price that proves the idea wrong. The distance from entry to that price is the stop.

Position size falls out of those two numbers. Dollars at risk divided by the stop distance, as a fraction of price, is the most you should hold. If that size feels too small to be interesting, the stop is too wide or the idea is entertainment.

Write it down before the order: what you see, where you are wrong, how much that wrongness costs, and when you will look again. The practice desk asks you to acknowledge that ritual on purpose. It is slower than clicking. That is the point.