Course 4 of 5 · Beginner · 14 min
Risk management and discipline
The arithmetic that turns a stop distance into a lot size, and the decisions that undo it once a position is open.
Course overview
Description
This is the most useful course in the track, and the one most people skip. Risk management is not an attitude — it is a number you work out before opening a position: the amount this trade can take from your account if it goes wrong.
We work the position-sizing formula step by step, including the case where the answer comes out smaller than the minimum your account allows, which is the formula telling you something real.
The second half covers what happens to that plan under pressure: moving a stop, closing early, adding to a loser, and increasing size to win a loss back.
Example lesson: sizing a trade on a $2,000 account
Under a 1% rule this trade may cost at most $20. You want to buy EUR/USD at 1.0800, and the level that would show the idea has failed sits at 1.0770 — a 30-pip stop.
A 30-pip stop on 1.00 lot costs $300, so $20 ÷ $300 gives 0.0667 lots. Round down to 0.06. Always down: rounding up puts you over your own limit.
The stop distance sets the size. The size never sets the stop.
| The same $20 risk, two stop distances | |
|---|---|
| 30-pip stop | 0.06 lots |
| 60-pip stop | 0.03 lots |
| Cost if hit, either way | about $18–$20 |
Check your understanding
3 questions. Nothing is recorded and nothing is sent anywhere — the answers are checked in your browser.
Your stop needs to sit further away than planned. What changes?
Risk in money stays fixed. A wider stop means a smaller position, so the cost of being wrong is unchanged.
The formula returns 0.003 lots, below your 0.01 minimum. What is it telling you?
Rounding up would triple the intended risk. The options are a closer stop if the chart supports one, a smaller pip value, or no trade.
Increasing position size to win back three losses is…
Each step needs the next to be larger still. The size rose because of how the losses felt, not because the chart changed.
Practise it before it costs anything
A demo account runs the same platform on the same live prices, with nothing at stake.
