Risk before returns
Practice position sizing and understand why protecting capital comes before chasing returns.
beginner · 30 minutes · MarketPulse editorial team
Learning objectives
- Calculate loss exposure
- Understand drawdowns
- Build a written risk checklist
Curriculum
1. Size the loss before the trade · Free preview
Open lesson2. Drawdowns and a written plan
Open lessonFree preview · Size the loss before the trade
Position sizing begins with the amount you can afford to lose, not the amount you hope to make. In a simplified example, a fictional $10,000 account risks $100 on a trade. If the planned entry is $50 and planned exit after a loss is $45, the planned loss per share is $5, so the simplified size is 20 shares. Fees, gaps and slippage can make the actual loss exceed $100.
A stop order is not insurance. Markets may gap through the trigger, execution can be worse than expected, and some assets may not trade when you need them. Leverage can magnify losses and create liquidation risk. This exercise teaches arithmetic; it does not recommend a risk percentage or a trade.
This course is free. Sign in to save quiz progress.
Self-study educational material. No guaranteed returns or personalized investment advice. Platform-issued certificates are not accredited.