← BeginnerLesson 14 · 4:50
How much should you risk?
Summary
You can size a trade before you pay by taking a fixed percentage of your account and checking whether the trade fits. You can show what a run of losses does at different sizes and how hard it is to climb back. You know one winning trade proves nothing about a method, and that you should only trade with money you can lose in full.
Key terms
- position sizing
- Choosing how much of your account to put at risk on one trade.
- fixed percentage per trade
- run of losses
- a win is not proof
Check yourself
Answer each question to see why the right answer is right.
1. Your account is $5,000 and your example rule is 2% per trade. How much can one trade put at risk?
2. Under that 2% rule on $5,000, does one contract of the $345 call fit?
3. Starting from $5,000, five trades in a row go to zero, each risking 25% of what's left. Where does the account end?
4. From $1,187, what gain would you need to get back to $5,000?
5. The same call, at the same price, on the same day: one replay wins $655 and the other loses $345. What does the lesson conclude?
Finished the video and the quiz? .