Stops, Sizing, and Trade Management

The initial stop

The stop goes beyond the swept ERL wick. That is the whole rule.

No fixed distance. No maximum. A twenty point stop and a sixty point stop are equally valid if that is where structure sits. A stop placed anywhere other than beyond the wick is not protecting the trade. It is just a number you picked.

Sizing around the stop

Every trade gets the same dollar risk. The stop width changes, so the contract count changes to match.

contracts = dollar risk / (stop in points × $ per point)

NQ  = $20 per point        MNQ = $2 per point

Same $500 of risk, three different structures

A wide stop day is a small size day. Not a full size day that happens to stay under the cap.

The three gates

1. 01

   Dollar risk

   If the structural stop cannot fit inside your per-trade dollar cap at the minimum size you can trade, you cannot take the trade. Not negotiable, and the only one of the three that is.

2. 02

   R:R

   Measure entry to the opposite ERL before you enter, every time. There is no hard floor. Around 2R and below, ask whether you entered too far from the level, because waiting for the deeper FVG retrace usually fixes it. But a clean setup showing 1.5R to 2R is still a trade.

3. 03

   Location

   If a setup that normally needs thirty points suddenly needs eighty, you chased the displacement instead of waiting. The stop is telling you about the entry.

After entry

1. 01

   Let it clear the first key level

   The nearest internal liquidity: FVG fill, EQ level, or STH/STL. Price reaching it is confirmation the draw was read correctly. You are not taking anything off here.

2. 02

   Move to breakeven

   Once that level is cleared, move the stop to BE plus two points. The position is now free, and the trade can no longer cost you anything.

3. 03

   Keep protecting as further levels clear

   As each subsequent key level is taken out in your favour, move the stop up behind it. Structure sets where the stop goes here, exactly as it did at entry.

4. 04

   Hold to target, the opposite ERL

   One target, full position. This is where the size of the win comes from, and taking pieces off before it is what caps the model's upside.

The R:R maths

Think in R, not points. R is your risk on that trade, whatever the structure required.

A completed trade is exactly what you measured at entry: fair value to the opposite ERL. There is no scaling out, so the number you measured before clicking is the number you get. When the retrace is deep and you are close to the level, that is often 4R and up. When it is shallower, it is 1.5R to 2R, and those still count.

That mix is why the model does not lean on a high win rate. At fifty percent, an average winner well above 1R is what carries the arithmetic. It is arithmetic, not a forecast of what any particular month does.

The trades that do not reach target mostly end at breakeven rather than at a full stop, because the stop moves once the first key level clears. A losing month is usually a month of breakevens, not a month of losses.

The position management truth

You do not make money on entries. You make money on what you do after the entry. Clear the first level, move to breakeven, then leave it alone and let it reach the draw. The hard part is not the analysis. It is sitting still.

Before you move on

• You can calculate contracts from a stop width in your head
• You know all three gates and which one is not negotiable
• You can explain why a sixty point stop is not automatically worse than a twenty point stop