Stop-Loss & Risk Management

Risk Is the Part You Control

You cannot control the next tick. You can control how much you risk if the idea is wrong, how many attempts you take in a day, and whether you increase size after a win streak. Professional processes treat risk as a design input—not an afterthought when the trade is already underwater.

What a Stop-Loss Does

A stop-loss is a pre-defined exit if price reaches a level that invalidates your thesis. It is not a guarantee of that exact fill—gaps and fast markets can produce slippage—but it still defines intent.

• Place stops where the idea is wrong (often beyond structure), not at a random round number
• Wider stops need smaller size to keep rupee risk constant
• Moving a stop further away “just this once” is how small losses become account problems

Position Sizing in One Idea

Decide risk per trade as a fraction of capital (many learners start tiny). Then size so that if price hits the stop, the loss is approximately that amount.

Example logic: risk ₹500, stop is ₹10 away → about 50 shares (before fees, slippage and product specifics). The exact formula varies by instrument; the principle does not.

Daily and Process Limits

• Max daily loss — stop trading for the session when hit
• Max trades — prevent revenge trading after a scratch or loss
• Max open risk — avoid stacking correlated positions that are really one bet
• No size increase after emotions — scale only after a written process review

Practise Risk Before You Practise Profit

In simulation and Market Replay, score yourself on whether you honoured stop and size rules—not only on P&L. A green day that ignored risk is still a process failure.