Risk per trade
A common planning method starts with a fixed percentage or fixed cash amount that can be lost if the stop is reached. This allows position size to be derived from risk rather than emotion.
Leverage
Leverage increases exposure relative to capital. It can magnify gains, but it also magnifies losses and can cause positions to be closed quickly when markets move against them.
Risk-to-reward ratio
Risk-to-reward compares the planned loss distance with the planned target distance. A higher reward multiple does not automatically mean a better setup; probability and execution quality still matter.
Drawdown thinking
Several normal losses can occur in sequence. Traders should consider whether their risk size still allows them to follow the same process after a losing streak.
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