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Risk management

Position sizing, drawdown and risk concepts for educational study.

• Risk-Reward Ratio (R:R)The expected profit of a trade divided by its potential loss. A 1:3 ratio means a $1 risk is taken to make $3.
• Position Sizing: Complete GuideConvert a defined loss budget and invalidation distance into disciplined exposure.
• Stop-Loss and Take-Profit FrameworkDesign exits around invalidation, market structure, volatility, and execution reality.
• Drawdown and Recovery MathematicsUnderstand asymmetric recovery, loss clusters, and capital-preservation thresholds.
• Leverage, Margin, and LiquidationLearn how notional exposure, maintenance margin, and forced closing interact.
• Risk of Ruin in TradingConnect edge uncertainty, bet size, loss streaks, and survival probability.
• Portfolio Correlation RiskDetect hidden concentration when different positions depend on the same market driver.
• Value at Risk and Expected ShortfallUse VaR and expected shortfall while recognizing model and tail limitations.
• Trading Risk Management PlanTurn limits, sizing, execution, review, and emergency rules into one operating document.
• Position SizingThe process of choosing trade size so a single loss does not exceed a defined fraction of capital — typically 0.5–2% per trade.
• Monte Carlo Forward Scenarios for Algorithmic Strategy Risk DistributionsBlock bootstrap vs parametric paths, copulas for joint shocks, and separating model risk from sampling noise.
• Recovery Factor as a KPI for System Robustness Beyond Raw ReturnNetProfit / MaxDD variants, horizon sensitivity, instability when max DD trivially small sample artifacts.

Educational glossary content only — not investment advice.