PLAN THE DOWNSIDE
Risk Management
A clear setup includes a defined invalidation point and a plan for what happens if the market moves against the idea.
Before entry
- Establish the stop-loss before entering.
- Assess stop distance and position size relative to account risk limits.
- Determine the intended take-profit level.
- Evaluate the planned risk/reward relationship.
- Identify the conditions that invalidate the setup.
During and after
- Avoid impulsive entries and excessive trading.
- Adjust stops only according to relevant price levels and a predefined plan.
- Account for slippage and the possibility that stop execution differs from the planned price.
- Review strategy alignment, execution, management, and outcome after closing.