Phase 2: Control · 8 min
Turn account risk, invalidation and position size into one short pre-trade calculation.
By the end, you can:
- Calculate a chosen maximum loss in account currency.
- Understand R as a way to compare planned risk and outcome.
- See why drawdown makes recovery progressively harder.
Define the downside first
Risk control begins before entry. First decide the maximum account loss you are willing and able to accept for the idea. Then choose a logical invalidation point. Only after both are known can position size be calculated. Starting with the desired profit or the platform’s default amount reverses that order.
Example only: on a €1,000 practice balance, 0.5% is €5. This is arithmetic, not a personal recommendation. The appropriate limit may be lower—or trading may be unsuitable altogether.
Invalidation before size
An invalidation point is the price or condition that says the original idea no longer applies. Stop distance follows from that point. Position size must then fit the chosen maximum loss after spread, commission, slippage and any currency conversion are considered.
If the minimum contract size would risk more than the limit, the correct size is no position. Moving the stop closer only to force a larger position changes the idea rather than controlling it.
Use R to compare unlike trades
1R is the amount planned at risk before entry. A result of +1.5R gained one and a half times that amount; −1R lost the planned amount. R makes process review easier across different balances and instruments, but it does not hide fees and it does not guarantee that the planned stop will be filled at the expected price.
Worked demo example
- Practice balance
- €1,000
- Example risk limit
- 0.5% = €5
- Planned invalidation
- Defined from chart structure
- Maximum position size
- A size whose estimated stop loss plus costs is no more than €5
Drawdown is asymmetric
After a loss, the percentage gain needed to recover is larger than the percentage lost. A 20% decline leaves 80% of the starting balance; returning from 80 to 100 requires a 25% gain. This is why limiting a series of losses matters more than trying to win them back quickly.
Increasing size after a loss, adding to an invalidated position or moving a stop farther away turns a defined decision into an uncontrolled one.
For arithmetic help, use the Risk Control Center. Enter practice values and independently verify the result before relying on it.
Demo exercise
Practice: write the four-line risk ticket
Before one demo observation, write: (1) practice balance, (2) chosen maximum loss in percentage and currency, (3) exact invalidation condition, and (4) calculated maximum size including estimated costs. If any line is missing, skip the observation.
Knowledge check
Answer two questions
Choose an answer and feedback appears immediately. Both answers mark this lesson complete in this browser.