Position Sizing
Position sizing is determined by the distance to invalidation and the risk you are willing to take on the trade — not by conviction, target, or account size alone. Sizing to a fixed fraction of capital risked per trade is the most durable approach to avoiding ruin.
Invalidation vs Stop Loss
Invalidation is the level at which your thesis is proven wrong. A stop loss is the execution of that decision. Defining invalidation first — based on the reasoning, not an arbitrary price — keeps the trade honest and the risk real.
Drawdown Control
Drawdowns are mathematically brutal: a 50% loss requires a 100% gain to recover. Controlling the size of individual losses and the correlation between open positions is how catastrophic drawdowns are avoided. Survival precedes success.
Trade Management
How a trade is managed after entry — when to add, when to reduce, when to exit — should be planned before the trade is opened. Emotional management in real time is far harder than planning in advance.
Process & Review
A repeatable process and structured review of every trade — what was the thesis, was it right, was the risk managed well — is what turns experience into improvement. Without review, experience is just time passed.
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