Education · Stage 10 · 01
Risk management: the rules
Trading is not about being right. It is about surviving long enough for whatever advantage you have to show up — which is the playbook's own sentence, and the reason this stage exists at the end of the path rather than the beginning.
Mak · 4 min read · Stage 10, article 1 of 4
What follows are the rules from the playbook this site is built on, presented as one person's limits rather than as advice. The structure is the part worth copying; the numbers are the part worth replacing with your own, using the arithmetic from the first stage.
Four levels, not one
Almost everybody has a per-trade limit. Almost nobody has the other three, and the other three are what stop a bad day becoming a bad quarter.
The playbook's proportions are a third at each step: the daily limit no more than a third of the weekly, the weekly no more than a third of the monthly. Its own figures are a small fraction of the account per trade, a few per cent in a day, and around five per cent in a week — with the week treated as a review week if it gets there.
The rule that decides everything else
Never lose more on a losing trade than you make on an average winning one.
Written as one line it looks obvious. It is not, and it is the rule most often broken by widening a stop — because that is exactly the moment when this rule is being violated and it feels like patience.
It also quietly settles the reward question. If a typical loss is capped at the size of a typical win, the arithmetic works out over a long enough series; if losses are allowed to be bigger than wins, no amount of being right compensates. The playbook's version of that is blunt: never take a trade whose sensible target is smaller than its stop.
The one almost nobody writes down
This is the most original rule in the whole playbook, and it is worth reading twice.
Find out after which losing trade your next one is almost always a loss too — and cap your number of losing trades per day just below it.
Everybody has that number. For some people the second loss of the day is already contaminated; for others it is the third or fourth. It is not a matter of character, it is a matter of observation, and it is sitting in your own records waiting to be counted.
What makes it powerful is that it converts a psychological problem into a mechanical limit. You do not have to notice that you are tilting, which is the one thing nobody can do reliably while tilting. You only have to count.
The other limits worth having
- A stop before entry, always. No stop, no trade. Placed with the broker rather than held in your head — and the article on order types explained what «placed» does and does not guarantee.
- Three stopped-out trades in a row → halve the size. Not stop entirely: reduce until the process feels normal again. A rule that only says «stop» gets ignored; one that says «continue, smaller» gets followed.
- Correlation counts as one position. Two instruments that move together are one idea in two accounts, and the risk adds up even though the platform shows two separate lines.
What kills accounts
The playbook's list, and every item is a decision made during a trade that should have been made before it:
- Widening the stop because price is approaching it.
- Revenge trading — entering immediately after a loss, in anger.
- Over-trading in the dead hours, which the stage on the day already warned about.
- «It will come back» — ignoring the stop because last time it did.
Notice what all four have in common: none of them is an analytical error. The chart reading may have been perfect. That is why this stage is not an appendix to the others — and why the next article is about the specific mental machinery that produces all four.