WY-06-28 / 07
Risk Budget, Unit Risk, and Position Sizing
Decisions, Execution & Validation
Lesson / WY-06-28
Position sizing converts a structural judgment into a quantity the account can tolerate. Let B be the permitted planned-loss budget, P planned entry, S the protective-stop reference, q quantity, and m the contract multiplier per price unit for a linear product. B must be a fixed positive monetary amount determined before quantity. Choosing affordable quantity first and then reverse-engineering a larger B removes its constraint. P should approximate executable price rather than the chart's ideal line; S is the protective order's planned trigger. Both differ from structural confirmation price: the market may hit S and exit before later conditions such as a close below or a failed next rally confirm structural failure. Waiting for complete structural confirmation before stopping makes actual loss distance greater than that used in sizing.
Course content is for learning and research only. It is not investment advice.
Read the Chapter ↗Timestamps
10 lessons · Chapter contents
01Analytical Bias, Trading Opportunity, and Entry Trigger↗02Tests, LPS/LPSY, Breakout Retests, and Trend Continuation↗03Early, Confirmed, and Retest Participation↗04Price Advantage, Information, and Potential Risk↗05Hypothesis Invalidation, Discretionary Exit, and Protective Stops↗06Market, Limit, and Stop Orders↗07Risk Budget, Unit Risk, and Position Sizing↗08Multipliers, Minimum Ticks, Currencies, Costs, and Nonlinear Products↗09Portfolio Correlation, Concentration, and Abnormal-Market Contingencies↗10A Complete Trading Plan↗Observe the market: start with context and place price within its structure.
Understand structure: compare supply and demand, and let evidence support or revise your hypothesis.
Form a view: define risk limits and know when to reassess.
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Relative Strength and Opportunity Screening
Point-and-Figure Charts and Price Target Estimation
