Risk Management

Level: Beginner · About 10 min · 5 slides

Risk management keeps you in the game. Coach's rule: never lose more than 1–3% of your total account in a day, and stop after two red days in a row. Size every position from your stop, aim for at least 2:1 reward-to-risk, and journal everything.

🔑 Key takeaways

• Max loss 1–3% of your account per day: $100–$300 on a $10K account.
• Shares = risk $ ÷ (entry − stop).
• Aim for at least 2:1 reward-to-risk.
• 2 red days in a row → stop trading and go back to paper trading.
• No more than 20% in one sector; wider stops for high-beta stocks; journal every trade.

✅ Your homework

1. Write your daily max loss in dollars and put it on a sticky note by your screen.
2. Size three paper trades with the formula before entering.
3. Plan one trade with a 2:1 target and stop on the chart.
4. Start a journal: entry, exit, strategy, emotion, lesson.

📎 Resources

• Coach's Rules (Lesson 0)
• Lesson 6: stop losses and position sizing
• ADT Academy: https://americandreamtradingacademy.com