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Most traders don't fail because they lack
winning ideas.

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They fail because they size wrong, violate
their stops, and let one bad trade destroy
their account.

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Let’s be clear: risk isn’t part of the
job. Risk *is* the job.

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The first step is to stop thinking in
dollars. Dollars are emotional. They make
you hesitate. They make you hope.

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Professionals don’t measure trades in dollars.

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They use a risk unit, which we call ‘R’.

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This is your new currency.

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Your R is the maximum amount of capital
you are willing to lose on any single
trade if you are proven wrong.

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Everything else flows from this number.

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Here’s how you define it.

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Under normal market conditions, your 1R
should be a small fraction of your total
equity.

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I use 0.25%, or a quarter of one percent.

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If you have a $100,000 account, your 1R is
$250.

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That is the most you can lose on one
trade. Period.

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Your share size is no longer a guess; it’s
a simple calculation.

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If your R is $250 and your stop-loss is 50
cents from your entry, you trade 500
shares.

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The risk is defined before you even click
the button.

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This brings us to the rule that saves you
from yourself: the daily loss limit. My
wall is 2R.

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If I take two full 1R losses, I am done
for the day.

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The platform is shut down. No exceptions.

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This isn’t a suggestion, it’s a firewall.

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The day you feel the strongest urge to
break this rule and "get it back" is the
exact day this rule will save your career.

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Revenge trading is financial suicide.

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The 2R limit is the circuit breaker.

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Look at a real scenario.

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You go long stock XYZ as it breaks out.

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You calculate your size for a 1R loss of $250.

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The trade reverses, and you get stopped
out. You lose 1R.

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It's a cost of doing business.

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You take another setup on stock ABC. It
also fails. You lose another 1R. Now you
are down 2R. Your day is over.

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You protected your capital and your mental
state.

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You will be back tomorrow, sharp and ready.

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The amateur without this rule gets angry,
doubles down, and blows his account before
lunch.

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Your goal isn't to be right on every trade.

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It's to ensure you are around to trade
tomorrow.

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Risk management isn't a constraint.

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It is the foundation of freedom.

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It allows you to execute without fear,
because you know the exact cost of being
wrong.