Building your own risk rules
Learning objectives
Write six specific, testable risk rules covering per-trade risk, stops, targets, exposure, stopping points and record-keeping
Explain why a rule must be specific enough that breaking it is visible
Set a review cadence that judges your rules across a block of trades rather than a single outcome
Why written rules beat good intentions
A decision made calmly in advance and a decision made mid-drawdown are not the same quality of decision, even from the same person.
That's the entire argument. You will be at your least objective at exactly the moments that matter most: after a big loss, after a run of wins, when a position is running against you and moving the stop would make the discomfort stop. Rules exist so that the version of you with a clear head gets to overrule the version of you with money on the line.
Written down, they also become testable. An intention can be quietly redefined afterwards. A rule either was followed or wasn't.
The six rules
1. Risk per trade
A fixed percentage of account equity, risked on any single position.
From lesson F2.3. Pick a number, write it down, and treat it as the ceiling rather than the average.
Example: I risk 1% of account equity per trade.
2. Stop placement
Where the stop goes, and what you will never do to it.
From lesson F2.2. The second half matters more than the first.
Example: Every position has a stop before it's opened, placed at the level that invalidates the trade idea. I never widen a stop after entry.
3. Minimum risk-reward
The ratio below which you decline the trade.
From lesson F2.4. Note this is a filter for rejecting trades, not a target to manufacture.
Example: I take no trade whose plausible target is less than 1.5R away, measured to a level the market has previously reacted to.
4. Total open exposure
How much risk you'll carry across everything at once, accounting for correlation.
From lesson F2.5, and the rule most traders don't have. Five positions at 1% each is 5% at risk, and considerably more if they depend on the same thing.
Example: Maximum 3 open positions. Maximum 3% total open risk. Positions that depend on the same outcome count as one position.
5. Stopping points
The losses at which you stop trading and review.
From lesson F2.6. Set daily or weekly and overall. Decide these while calm, because you'll want to ignore them later, and knowing that in advance is the point.
Example: If I'm down 3% in a day, I stop for the day. If I'm down 10% from my peak, I stop and review before placing another trade.
6. What you record
The data you'll need to judge any of this.
Without records you have opinions about your trading, not evidence.
Example: For every trade I log: date, instrument, direction, entry, stop, target, size, exit, result in R, and my reason for taking it.
That last field does more work than all the others combined. Reviewing thirty trades and finding that a third of them have no reason written down is a more valuable discovery than any performance statistic.
Make each rule breakable
Here's the test that separates a rule from a slogan: could someone reading your log tell whether you followed it?
- "Manage risk carefully" is not a rule. Nobody can audit it.
- "I risk 1% per trade" is a rule. It's either in the log or it isn't.
- "Don't overtrade" is not a rule.
- "Maximum 3 open positions" is a rule.
If a rule can't be broken visibly, it will be broken invisibly.
Judging the rules, not the trade
Two failure modes, opposite in direction, equally destructive.
Changing rules after a losing trade. A single loss is one sample from a process that produces losses by design. Lesson F2.6 covered why a run of five means very little. Rewriting the rulebook after any of it means you never accumulate enough evidence to know whether anything worked.
Never changing them at all. Rules set at the start were set with the least information you'll ever have. Some will turn out to be wrong for how you actually trade.
The resolution is a fixed review cadence. Judge your rules across a block of trades, thirty is a reasonable number, and review them at the end of that block. Lesson F1.6 made the same point about trading styles, and for the same reason: you need a sample, not an anecdote.
And when you do change something, change one thing. Change three and you learn nothing about which one mattered.
Test 1: survivability
Can you afford to lose every cent of this money without it touching your rent, your family's needs, or your sleep?
If losing it would change your life, it's not trading capital. No exceptions, no "just this once". Money you can't afford to lose makes you trade scared, and scared traders cut winners, widen stops and blow up on schedule.
Test 2: viability
Is it enough to practise properly?
Start with the useful reframe: your first budget is tuition, and your first demo account is months of full-speed practice that cost nothing, and micro lots let a few hundred dollars buy a long, cheap education.
Now the maths that reframe has to carry: with sensible risk of 1% per trade, a $200 account ($200 ≈ ₹17,000) risks $2 per trade. That's fine for learning mechanics, but a realistic path from $200 to meaningful income doesn't exist without taking ruinous risk so treat that money as the cost of learning, not a seed that will become a salary.
If your honest goal is income, you'll need either significantly more capital (built up over years) or the patience to grow skills first and capital later. Anyone who tells you otherwise, re-read the previous section.
Change them between sessions, never during one
The most important procedural rule in this lesson.
Rules get amended at a desk, on a review day, with a log in front of you and no positions open. They do not get amended at 3pm with a trade running against you, however compelling the reasoning feels at the time. That reasoning is not reasoning, it's discomfort looking for permission.
If you find yourself wanting to change a rule mid-session, write down the wish and review it later. You'll be amazed how few of them survive contact with a calm afternoon.
Your one page
Fill this in. Keep it where you can see it while trading.
Risk per trade: ____% of equity
Stop: placed at ________________ before entry. Never widened.
Minimum risk-reward: ____R
Maximum open positions: ____ · Maximum total open risk: ____%
Daily stop: ____% ·
Drawdown review point: ____%
I log: ______________________________ I review every ____ trades. I change one rule at a time, never mid-session.
What to remember...
These rules will not make you profitable. Nothing in this course does, and any content promising otherwise is worth walking away from.
What they do is narrower and more valuable than it sounds. They keep your losses small enough that a bad run is survivable, they stop your worst decisions being made at your worst moments, and they generate the records you need to find out whether your method has any edge at all.
That's the actual job. Staying in the game long enough, and keeping honest enough records, to learn something true about your own trading.
Key takeaways
Six rules cover it: risk per trade, stop placement, minimum risk-reward, total open exposure, stopping points and what you record
A rule must be specific enough that a reader of your log could tell whether you followed it. If it can't be broken visibly, it will be broken invisibly
Total open risk is the rule most traders lack. Correlated positions are one bet and should be sized as one
Review rules across a block of trades, change one at a time, and never amend them mid-session with a position running