Chapter 19 · Part Five
Risk and sizing card
The one page to read before every entry.
About 3 minutes
The rule in four lines
The stop goes beyond the swept wick
Structure sets the width.
Size flexes so that width equals your fixed dollar risk
Not the other way round.
No single trade risks more than ten percent of account drawdown
Ceiling, not target.
Judge on R:R and location, never on stop width
Width is information, not a veto. Neither is a fixed R number.
contracts = dollar risk / (stop in points × $ per point) NQ = $20 / point MNQ = $2 / point
The three gates
Gate
Dollar risk
- Test
- Does the structural stop fit inside the per-trade cap at minimum size?
- If it fails
- No trade. Not negotiable.
Gate
R:R
- Test
- Measured entry to the opposite ERL. Worth the risk?
- If it fails
- Judgement. Around 2R and below, prefer the deeper retrace.
Gate
Location
- Test
- Is the stop unusually wide for this setup?
- If it fails
- You entered late. Skip.
What is never a reason to skip
The stop is wide in points. The stop is wider than yesterday's. The stop is wider than you would like.
Wide is not the same as bad. Wide and close to the level is a valid trade at smaller size. Wide and far from the level is a late entry. Learn the difference, because that distinction is the entire risk model.
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