Risk & Sizing
How to survive long enough for a strategy to work. These terms cover how much to risk on a trade, where stops and targets go, how to size a position, and the numbers that show whether a method makes money over time.
16
terms in this topic
1
with a chart or figure
16
taught in an Academy lesson
12
other topics
16 terms, A to Z
- 8beginner
- 8intermediate
- Breakeven stopMoving your stop to your entry once a trade is in profit, so being stopped out costs about nothing instead of a full loss.
- Breakeven win rateThe win rate at which a given reward to risk neither makes nor loses money: 1 ÷ (1 + R:R).
- CorrelationHow closely two markets move together; positions in correlated markets are really one bigger bet.
- Daily loss limitA hard cap on how much you can lose in a day; hit it and you stop trading until tomorrow.
- DrawdownA fall from your account's peak to a later low; recovering takes a bigger gain than the loss.
- ExpectancyWhat a strategy makes per trade on average: win rate × average win − loss rate × average loss.
- Partial profitClosing part of a position at a first target and letting the rest run.
- Position sizingChoosing your size so that your stop distance costs exactly your planned risk.
- R-multipleA trade's result measured in units of what you risked: −1R is a full loss, +2R is twice your risk.
- Risk of ruinThe chance a strategy loses so much you can't or won't continue; driven mostly by risk per trade.
- Risk per tradeThe share of your account you can lose if a trade's stop is hit, usually 0.5% to 2%.
- Risk to rewardRRThe distance to your target compared with the distance to your stop, decided before entry.
- Stop-lossSLThe price where your trade idea is proven wrong and you get out, placed as an order before you need it.
- Take-profitTPThe price where you plan to close a winning trade, ideally at the next pool of liquidity.
- Trailing stopA stop that follows price in your favour, behind new swing points or by an ATR multiple.
- Win rateThe share of trades that end in profit; meaningless without the size of wins and losses.