Your edge doesn't matter if you can't stay in the game.
Most traders blow up not because they pick bad stocks, but because they manage risk like gamblers.
They die on one trade after surviving nine, because one moment of bad discipline erases everything.
Let's fix that.
First, stop thinking in dollars. Dollars are emotional.
Start thinking in Risk Units, or 'R'.
One R is the maximum you are willing to lose on any single trade, defined as a fixed percentage of your account.
For normal conditions, I use 0.25% of my equity.
If I have a $100,000 account, my R is $250. That’s it.
It’s a number, not a feeling.
Second, your position size is not based on confidence.
It's a simple calculation based on your R and your stop.
The formula is: Position Size equals your R-value divided by the distance from your entry to your stop-loss.
If your stop is tight, your size can be bigger.
If your stop is wide, your size must be smaller.
The dollar risk stays the same.
This is how professionals control their exposure. It’s math, not guts.
When volatility spikes and ranges widen, your stops must also widen.
If you don't reduce your size, you have silently doubled or tripled your risk.
Third, you need a daily seatbelt.
I call it the Daily Stop-Out.
For me, if I lose two R-units in one day, I'm done. Flat. No exceptions.
Down 2R, and I turn the screens off.
The single day you are most desperate to trade is the day you are least qualified to.
This isn't a suggestion, it's a hard wall that separates you from your worst impulses.
It's what prevents a bad day from becoming a catastrophic one.
I’ve seen it a thousand times.
A trader shorts a stock, say QRST, at a key resistance level.
The stop is 50 cents away.
He sizes correctly for 1R. The trade fails. He takes the small loss.
He sees another setup in a different stock, enters, and it also fails for a 1R loss. He's now down 2R.
Instead of chasing it back, he shuts it down.
He lost a battle, but he didn't lose the war.
He protected his capital and his mental state.
He will be back tomorrow.
His emotional peer is still revenge trading, about to blow his account.