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The Ultimate Risk Management Guide for Traders (Stop Losing Big)

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Basically, risk management is a system

for adjusting the amount of capital you

have exposed at any given time. It's

controlled by the number of positions

you have on, the sizes of each of those

positions, and where your stops are for

each of those positions. So, how do we

lower that risk? Say we're in uh we

start a corrective environment like a

few weeks ago. How do we lower the risk

given that those are the three factors?

Well, we can take less trades. We can

decrease the total number of positions

we have on our books. We can decrease

the starter position size that we're

taking on new positions or the overall

uh dollar invested. and we can tighten

up the stops and tighten up the sell

points, become more aggressive with

selling, you know, lock down gains, you

know, faster when we do have them. These

are all three different ways that we can

go ahead and lower risk if we would like

to. If the market environment shifts,

market feedback, maybe uh seven out of

your last 10 trades have been losers,

that's a sign that, hey, maybe I want to

go ahead and lower risk. Stop losses are

your insurance. They're basically the

cost of doing business. And a way of

thinking about it is it's your ticket to

actually buy a ticket to to actually

place a trade. you're paying your

stop-loss in order to actually enter the

trade and look to participate in a

strong trend. And the best thing about

this is and and way of thinking about it

is you get to decide exactly how much

you pay by defining your risk based on

the stop- loss as well as the position

size itself. What about gap downs? How

how do we manage risk here? Gap downs

will happen. I think the key thing here

is we we have to manage risk in real

time. a stock could just as easily gap

down and keep going and it breaks below

the base and then it breaks the 200 SMA

and then again you're an investor when

you should have been a trader. Uh you

got to take your loss when it's as small

as possible. Taking small losses is

mentally just you know an easier thing

to do. Small losses do sting but large

losses are devastating and really hurt

your confidence which is a huge part of

trading. you know, a big loss, you'll

have to take, you know, take a few days,

take a week, if it's a really big one,

take a few months off to really be right

again mentally and be ready to get back

in the game and, uh, you know, work your

way back up to where you are. So,

defining a stop loss first, when you've

got a potential setup, check your entry

point and logical, technical stop,

calculate the percent distance before

them, or ADRs if you like to think about

it in that way to account for

volatility. know the dollar amount of

your portfolio you want to invest and

then simply multiply this dollar amount

by your stop and check if you're taking

up too much additional portfolio risk to

take the trade. If the total risk is

going to be 1% of your account and you

don't want to take that on a single

trade or you don't want to add that to

your total open risk, then you either

have to not take the trade, choose a

different stop or lower the position

size. It's as clear as

[Music]

that. Well, let's go ahead and get

started. So, welcome everybody to the

next Trader Handbook webinar. Uh, this

is a series of webinars that we're doing

along with the release of our book which

will be on May 27th, the Trader

Handbook. And each chapter kind of

covers one of this these different

concepts. And to go along with the book,

we thought it'd be great to kind of talk

through each uh concept and aspect of

building a trading system and go into

more detail, give more examples. Uh, and

I think these are a great accompaniment

to the book. Uh, we're about halfway

through now. After this week, we will be

halfway through. Uh, but there's still a

lot to cover, market cycles will be a

really good one, especially considering

the current conditions. Uh, so if you

haven't yet and want to be the first to

know with all these webinars, go ahead

and register for the free interest list

and you'll be the first to know about

all the different uh, resources as well

as future upcoming

webinars. Uh, here's the QR code to join

that trader weight list, traders

handbook weight list. You can scan that

QR code just right there to join. Again,

it's 100% free. And in addition to

registering for the webinars, we'll also

be sending out different resources. Uh

tomorrow, I'll be sending out a

stop-loss setting guide. So, in addition

to today's webinar, I'll be expanding

on, you know, how I like to set stops in

a free article that I'll send by email

tomorrow. So, definitely go ahead check

this out. You'll receive all the other

previous ones once you sign up to this

Trader Handbook weight list. Uh so,

don't feel like you missed out if you uh

didn't sign up already to receive these

ones. you'll basically receive one a day

uh as soon as you sign up. So, here

again is that QR code. If you haven't

already, go ahead and register there and

I'll give it just one minute to uh allow

you guys just a little bit of time to do

that. All right. And yeah, u I see a

question actually from Miles in the

chat. You can watch all the previous

webinars um on YouTube. Uh we we created

a playlist on our channel called Traers

Handbook Webinars. You should be able to

find those there. And this one itself as

as soon as we're done with the live

stream, you'll be able to go ahead and

watch it uh back as much as many times

as you like to, but previously we've

talked of course about entry tactics,

trading foundations, edges, and setups.

Uh so if you haven't watched those

previous ones, definitely recommend

checking it out. All

right, so let's go ahead and get into

today's webinar. So welcome again uh

once again everybody. Uh today we'll be

focusing on risk management and

stop-losses. A really key chapter uh

both from a high level portfolio level

as well as setting individual stops on

different

positions. We wanted to start with uh

this quote from William O'Neal. Of

course, many of you know him, the

founder of Can Slim. Uh basically this

kind of sums everything up in terms of

why we should be saying stop losses and

focusing on risk management in the first

place. Uh he says, "Buying a stock

without knowing when or why you should

sell it is like buying a car with no

brakes or being in a boat with no life

preservers or taking flying lessons that

teach you how to take off but not how to

land. Basically, it's a key part of the

trading equation and really really

essential to allow us to trade for

decades. Here's the agenda today. We've

got a lot to cover. Uh first, we'll talk

about kind of again from a high level

what is risk management, stop- losses,

our tickets to trade, our insurance as

well. What are tight and logical stops?

What does that actually mean? Then we'll

discuss some guidelines for both swing

trading and position trading. It's a

little bit different. Um, of course,

swing trading is a little bit faster,

tighter stops, um, you know, faster sell

rules and position trading. You want to

kind of be a little bit more hands-off.

Let the position work. Uh, you'll wind

those stops a little bit to make sure

that you don't get choked off of a

trade. And these guidelines also be

really good for a lot of you folks who

probably, you know, do this part-time or

work a full-time job and again want to

be a little bit more hands-off. uh these

guidelines should help you with that. Uh

then we'll discuss position sizing uh

portfolio level risk management as I

mentioned and also I think this is

really relevant lowering and raising

risk based on market health. How you can

do that what are the three different

factors uh different gears that you can

adjust uh to do that and both lower and

raise risk in accordance to whether

we're in an uptrend or a

downtrend. So there these are a few

questions that likely you guys have

about risk management. We'll be

answering a lot of them today. um as

well as the position management ones in

the next webinar on this upcoming

Saturday. Where do I put my stop? When

should I sell? How do I manage risk?

What does risk management even mean? You

know, we hear that term, you know, you

know, shouted about a bunch of times,

but what does that actually mean? How do

we practically go about doing it? When

do I take a profit? When do I move up my

stop? All these questions uh we'll talk

about and address in today's

webinar. All right. So, first starting

from a very high level perspective, what

is risk management? Basically, risk

management is a system for adjusting the

amount of capital you have exposed at

any given time. And it's controlled by

three factors, which we'll get into in

even more detail in the upcoming slides.

Uh, it's controlled by the number of

positions you have on, the sizes of each

of those positions, and where your stops

are for each of those positions, uh,

slash where you will exit. If you have a

gain, for instance, you know, the point

where you would exit may maybe be an

undercut of the 50 SMA, the 21 EMA, the

prior week's low. uh basically it's

controlled by where your exit would be

if the stock starts pulling back and

basically you need to put on risk to

potentially profit from winning trades.

So I think that's an important part that

we do want to emphasize today. We're

talking about managing risk not

eliminating completely that's

impossible. Um and to actually profit

and make uh good trades. We have to put

on risk and we'll talk about how to

manage that risk to make sure that our

losers are smaller than our profits. And

like I say here, the key to de is to

develop a riskmanagement system that

keeps our losses small relative to your

profits over time. Again, we're always

talking about a series of 50, 100, 500,

a thousand trades that you'll make over

the course of your trading career. We're

not just focusing on one trade. Uh but

you know, the key is to think long term

and think over a series of

trades. So defining your risk, uh this

just kind of sums it up really nicely. I

think you should always be aware of your

total open risk and draw down. if all

stocks hit their stop losses. We'll show

you guys how to calculate that and uh

that will be part of the quiz. So, make

sure you guys pay attention for that.

Um, and we want to emphasize that you

are in complete control of how much your

capital is at risk at any given time.

And we'll talk about the three different

factors that you can adjust to control

how much total open risk you have. And

basically, you want to think of this

like managing a business business

because that's what trading is. We don't

want to just do this for fun or or you

know it can be fun and the process is

very fun but we want to make profit over

time. That's our goal. We want to

compound and we always want to be aware

of the total open risk and break even

line so we can sleep at night and make

sure we're uh managing our system

properly. So that gets us into our first

kind of high level highle topic total

open risk. So what is total open risk?

Total open risk is basically the

percentage of your portfolio that you

would lose if all your stocks hit your

sell points. whether that's stop losses

or again if it breaks below a moving

average and that's your sell rule, you

know, that would be your sell point. Um,

and we're going to walk through the math

here and pay pay special attention like

I said because we'll be doing a giveaway

related to be able being able to do this

math. It's pretty easy. Uh, but we'll

see uh you know who gets the the answer

uh answer right first. Uh, but basically

the process to calculate your total open

risk is first things first, per

position, multiply the dollar amount

invested by the percent distance from

your stop. So, for instance, if you have

$10,000 invested into a particular

symbol, you multiply that by a 4% stop,

and that gives you the dollar amount

that you have at risk for that position,

which in this case on a $10,000

position, a 4% stop would be $400 at

risk. Then, uh, like I said, do this for

each position. And then, you want to sum

sum up all those different individual

position risk that you have. So,

position one, if that's $400, plus

position two, $200. Position three,

$600. Position four, $700. And you know,

this the total in this example is ends

up being $1,900. And this would be your

dollar draw down if all your stocks were

stopped out or you sell all your stocks

at your predetermined uh points. Uh then

to calculate the percentage total open

risk, what you have to do is divide this

dollar draw down uh the dollar open risk

by the amount your total account is. So

in this example, we're using a 50k

account. it'd be $1,900 divide by 50K

time 100 and you basically have 3.8%

total open risk. So this is how you

calculate this and this would be your

draw down if everything was stopped out

um or sold in your

account. So to kind of put this in

perspective, we we'll put you guys to

work right away. Let's say you have an

account size of $100,000. These are

positions. You've got deep, Vue, TLDV,

and RM. These are the position sizes

right here. 25K, 15K, 10K, and 25K.

Again, these are their stops. I want you

guys in the chat right now to do a

little bit of math and calculate what is

the total open risk both in dollar

amounts and percentage. And we'll see

who gets it correctly. And I'll show the

answer and walk through this example in

just a

minute. And Ry, while we're doing this,

is there anything you want to add about

risk management, why it's important uh

while while they're uh you know, doing

some math over here?

Yeah, I I would say, you know, a lot of

traders are trading part-time and

they're trading with capital that they

are willing to lose. Um, which can be

actually, you know, it's hard to treat

it like a business when you're doing

that. And you kind of, you know, if if

the money grows, great. If it doesn't,

great. Um, in that type of situation,

you know, you learn the hard way or you

eventually just give up and and move on

because you feel like the stock market

was, you know, a slot machine that

doesn't pay you back, right? And most

slot machines don't. So that's why risk

management becomes a topic that the

great ones speak about very you know

strongly that you without this you

cannot be a consistently profitable

trader. So knowing your stops, knowing

your exit plan before you intend to buy

or placing an order to buy without

knowing where you will accept that

particular loss will result you in, you

know, almost never being successful if

you don't know your exit plan. So it's

again one of those things as we cover

the the you know the different pillars

uh throughout the the 10 and 11 10 or 11

webinars that we're doing each one of

them is a core kind of value or

initiative that you have to take up so

that you can you know make it part of

your um business plan right so it's not

that one component was more important

than the other all of them have to work

together for you to a a trading system

and it's no different for risk

management. So yeah, and risk management

I think is one of the most important

concepts to stay trading and make sure

you preserve your account over time. I

was lucky enough that Dr. Wish

emphasizes from, you know, the early

days of the class where I first learned

how to trade. Uh and part of our final

project was, you know, we had a dummy

account of 100K that we traded in a

class challenge. And for every trade

where we had a loss over $500, we had to

dissect that trade, analyze what went

right, what went wrong, and basically,

you know, come up with a system, a

reason why we will never lose again, you

know, greater than $500. So, I think

that's a great um act actually, uh, you

know, advice for everybody out there.

Uh, come up with a dollar amount that

you don't want to risk more than that or

lose more than that on a trade. And then

for every trade that you risk more than

that or lose more than that, you have to

analyze and and dissect and do a lot of

post analysis to determine what went

right, what went wrong. So I think

that's a that's a good exercise for you

folks. And it looks like we've got some

great answers in the chat. Most of you

guys already got it right, which is

great. And uh Swingman, uh you are the

winner today. So congratulations. Shoot

me a DM on Twitter and we'll go ahead

and give you a signed copy of the Trader

Handbook once we have those available.

So, congratulations. Uh, shoot me again

a DM on Twitter, um, or email me at

richardtraderline.com and we'll get you

set up. But congratulations and great

work everybody. I see a lot of people

with the right answer. We'll go ahead

and walk through the process. Uh, the

first one, you've got $2,000 uh, of risk

here because 25k time 08. Then you've

got 15K time 05750, 10K time 03300. 25K

*10 2500. And then you sum all these up

and you get a dollar risk, which would

be your dollar draw down if everything

was stopped out of

5,550. And I rounded this up to 5.6%.

But you basically do that that number

divided by your account value. And

that's how you get your total open risk

amount. So great job everybody. Most of

you guys got it got it right. And you

should be able to do this math because

this is the simple thing. This is a

simple way to basically keep your risk

in check and recognize are we in a

corrective environment under the 200 SMA

under the 21 EMA and I want to be

risking a whole lot less than this or

are we in a strong market environment

and this is an okay amount or even want

to increase my risk maybe take out up

another position and get more invested.

But this math and being able to

calculate this to to open up and risk is

really key to treating this like a

business and you know from a portfolio

management perspective being able to

actually manage risk properly. So this

is a good exercise here. Um and the

three pillars that we can

control this amount if you think about

it are these right here. How many

positions we have, the amount invested

in each position and the percentage away

our stop/ell point is from the current

price. And what's great about these

factors is that all of these are

elements that we can control and adjust

based on our goals, performance, market

conditions, market feedback, all of

that. So I think it's really important

to recognize and it should be empowering

to you that all three factors right

here, how many positions we take, if we

take a new trade or not, the amount

invested in new positions or existing

positions, the percentage of way we keep

our stop loss or how far um you know

we're willing to you know let the stock

pull back before we sell it. All of

these factors are within our control. So

we have full control at all times of how

much risk we're taking. So that's kind

of the key point we want to uh uh to

emphasize here. So how do we lower that

risk? Say we're in uh we start a

corrective environment like a few weeks

ago. How do we lower the risk given that

those are the three factors? Well, we

can take less trades. We can decrease

the total number of positions we have on

our books. we can decrease the starter

position size that we're taking on new

positions or the overall uh dollar

invested and we can tighten up the stops

and tighten up the sell points, become

more aggressive with selling, you know,

lock down gains, you know, faster when

we do have them. Um, so these are all

three different ways that we can go

ahead and lower risk if we would like

to. If the market environment shifts,

market feedback, maybe uh seven out of

your last 10 trades have been losers,

that's a sign that, hey, maybe I want to

go ahead and lower risk. And these are

all three ways that you can do that. And

let's go ahead dive a little bit deeper

into each one. So, how should you lower

risk based on decreasing the number of

positions? Uh well, one way you can do

it is by grading your positions. So,

what you want to do is sort your

existing positions by your profit or

performance over the past month and then

grade your positions from A to D. Uh

taking this into account as well as kind

of your view on the potential of each

stock going forward. So, if the stock

just broke out, it's still just pulling

back to 21 EMA. it's it's a stage one

base early in a stage two uptrend. It

might still have a lot of potential,

especially if the market environment is

still strong. Uh so you would kind of

grade that, you know, A to B, especially

if you have a nice profit in in that

stock. But if a stock, you know, hasn't

really performed much, it broke out and

then just kind of stagnated. Um and you

know, there's there's other sectors,

other groups acting well, that might be

more a C or D stock. and those would be

the first ones to sell if the market

environment shifts or you just want to

lower risk overall. Uh so again, as you

look to lower the total number of

positions, start by eliminating the D's

first and look to hold on to the A's if

possible. Uh Ry, anything you want to

add on this slide or or you know in just

in general these three uh pillars

here? I would say, you know, one of the

things is tighten stops is easier, you

know, said than done. Sometimes what

happens is you go into this feedback

loop where you tighten it too much, the

stock comes back normally and then you

you get stopped out and then it

continues to rally, right? So each of

these points that Richard's made, you

you should see it through a series of

trades. Um, and and really don't think

of it as I have to get it right the

first time, especially when it comes to

tightening stops and, you know, or

selling into profit or I sold at 5% but

then now the stock is up 30 and I don't

have a meaningful position. All of these

things you you will get better at each

trade you place, you know, every time

you sell early or you tighten up stock

too much or you decrease exposure too

fast because the market's, you know,

just coming back that one day, you know,

straight down three, three and a half%

4% and you've decreased too much and

then the next day market's acting like

nothing happened, right? So all of those

uh factors you will learn to pick up as

you place more trades and and kind of

get repetitive. Um it's just reps again,

right? Every trade you'll learn

something. You'll tweak it will build

your experience and get better at it. Um

and it's not really about you know

perfecting each of these. It's something

that you know even

now sometimes I or when I speak to Ross

you know hey I you know that day really

shook me out because you know we got too

um I would say too bearish or too um you

know we're playing defense too much

because we let external factors

influence what's part of our system and

that is still something Ross is working

on after 30 years and it get just you

know some trends you you perform really

well just like basketball players some

some games they they have 60 plus points

right and they don't have 60 plus points

every single game. So every market cycle

that comes through you'll perform good

or great. In some market cycles you're

still doing the same thing but you're

not performing that well. Right? So I

think that plays a huge factor from a

journey uh getting better building

experience perspective. You won't be

perfect every single day and you won't

analyze because there are other factors.

You have a life outside of trading.

there's internal factors of if you're,

you know, actually in the game or you're

just no matter what you're doing, you're

in a bad spot. Um, as well. So, I think

the last one there with Titan spots, a

lot of people tend to, you know, try to

get this perfect uh, you know,

scientific formula that doesn't really

exist. So, yeah, perfect. And I want to

go back to the example for just a second

because somebody pointed out you're not

completely invested here. But the key

thing here is that that doesn't matter

for calculating your total open risk. So

this account is 100K. These added up are

only 75K. But that doesn't change how

much total open risk you have because

it's not based on how much you have

invested. It's just based on how much

you have at risk compared to your

account. Your total account value, not

what you have total invested. So just

want to clarify that point there. All

right, so getting into the next pillar,

decreasing the dollar invested. This is

kind of how you can lower risk based on

this factor. Uh, one one thing you can

do is consider selling positions

portions of your positions to bring uh

sizes back down to what feels

comfortable in the moment. Uh, maybe you

have a winner that has run really fast,

looks climatic, you can always sell

half, buy it back if it sets up again.

And what you want to do is look to

preserve your stronger stocks first. But

if the market does seem to be turning

and starting a correction and a winner's

extended from a base and is showing

weakening signs, downtime reversals,

breaks below moving averages, breaks

below trend lines, you can always sell

half and look to re-enter when

conditions firm up. Maybe at the next

base, maybe at the next pullback to a

moving average. And just in general, if

you're looking to lower risk, starting

position sizes can also be adjusted

down. And this is, you know, progressive

exposure, which we'll get into later on.

uh but you know as an example if you've

got a 100k portfolio and uh in general

you'd like to use 10k 10k positions as a

starter in a strong environment when the

market is very choppy very volatile

below moving averages if you're going to

trade you could instead of using a 10k

uh position starter you could use a 5k

and then maybe in the best environments

when you're getting great market

feedback five out of the last five

stocks has really worked things are

still setting up uh really firming up

you could then use a 15k star position

position. So you can kind of adjust risk

up and down based on the market

environment and we'll get into a little

bit more of that later on in today's

webinar. So this is kind of what Ry was

getting into. Um and we'll we'll discuss

some guidelines for both swing traders

and pos position traders uh in general

in terms of initial stops. Uh but you

know uh this is kind of how to lower

risk with regards to this factor. So a

strong market is forgiving. A weak

market is the opposite. When conditions

worsen, consider tightening up your

initial stop- losses a little bit and

being quicker to raise them to your

break even level. I remember in 2021,

this is an adjustment I made uh once,

you know, a lot of breakouts were

getting stuffed um and not following

through. Uh so I would move my stop up

to break even, you know, a lot faster.

Even this past December, this is kind of

what I did as well. And if typically you

moved your stop to break even at 3R, you

can then do so at 2 R. Um and you can

also take partials faster. We'll talk

about that in the next webinar. Uh but

basically in this type of environment,

especially a very corrective

environment, each stock you buy has to

prove itself to you that is worth the

risk, worth the added total open risk.

Uh that's what's really key. And uh you

know, during corrections, you want to

be, you know, stocks are basically

guilty until proven innocent. In a

strong environment, you want to give

stuff the benefit of the doubt. and

maybe you know if you usually put your

stops uh in uh you know wait until the

end of the day if it undercuts it

slightly and recovers see if it closes

strong and then take it off if it

doesn't in a weak market you want to act

quickly and kind of shoot first and act

ask questions later so that's kind of a

little bit about how to lower risk based

on stop losses and tighten them up. Uh

then on the flip side you know when

market conditions improve you know

eventually the correction we're in will

uh get better. We'll we'll see. It might

take some time. Uh but when conditions

approve, we do want to increase risk to

make sure we're participating fully. Um

and basically you do the flip side of

everything we talked about. You can

increase the number of trades and the

number of positions you have. Uh you can

increase the dollar amount invested per

position or as a starter size and adjust

stops and sell points back to normal uh

to your normal system. So those are a

few things regard to both decreasing as

well as increasing risk. Um Ry, anything

else you want to add here just to sum

everything up? And then next we'll get

into setting stops and guidelines for

both swing traders and position traders.

We'll we'll tie a lot of this into

market cycle as well. And um number of

positions. One of the first things is

sometimes traders go crazy with 10 to 15

positions uh that they put on and then

you don't know which one's working,

what's happening. It's almost like um

you know uh you can't do 15 things at

once. So, um, highly recommend that you

guys re try to reduce that. Um, also the

number of trades that you place in a

year, right? If your trades are north of

200, 300, 400 and you're highly active

and you're still, you know, your numbers

are not improving as you increase your

frequency, that basically means if you

actually reduce the number of trades in

your decision- making and make high

quality decisions and not focus on

frequency of decisions, it will result

in better, you know, just numbers

overall.

Um we always you know want to be in

every single trend and every single

stock that's moving up and the reality

of it is you will miss nearly 80% or 90%

of market leaders and then the 10% that

you do catch are the ones that will make

any meaningful you know difference to

your accounts uh as well. So, you know,

number of positions that are open, the

more you concentrate on a few, I like to

do three to five. Five is, you know, too

much for me. I'm trying to get to three.

And then I'm focusing on making high

quality decisions and picking, you know,

companies that are market leaders um

based on technical, fundamental, and

whatever criteria that you want to

define uh for them. Um, in terms of

increasing risk, it's all also dependent

on how much, you know, open risk you can

stomach. Some traders, you know, say

that, hey, if everything stops me out, I

don't want to lose more than 2 to 3% of

my overall portfolio. Some traders say,

hey, I want to, you know, aggressively

trade and they start at 5 to seven,

let's say percent. That's a little bit

on, you know, what your goal is, what

type of stocks you're trading, if

they're high ADR or low ADR type of

stocks, and then what segment of the

market you're focused on. If you're, you

know, focused on thematic runs like AI,

cannabis, shareers and these type of

names, they're highly volatile. Um, but

they will move your account, you know,

both ways in a big way, then you will

you need you need that, you know, up

that stomach, uh, to kind of hold on

when they really really pull back.

um as well because you know a 3 to 5%

pullback or a 10 to 15% pullback after a

70% run is kind of normal for those type

of names. So all these factors we'll

speak about uh but I think the most

important here is you know don't go

crazy with the number of physicians

because then your risk management gets

offaxis and you're busy looking at the

wrong things. you're busy looking at

what's happening and you know what's

this stock doing, what's that stock

doing instead of actually managing your

risk uh in the markets. Yeah, perfect.

All right, getting more into stop

losses. Uh you know, I showed this slide

in the previous webinar, but I think

it's really worth emphasizing this way

of thinking about it. Stop losses are

your insurance. They're basically the

cost of doing business. And oh, you

know, analogy that you can a way of

thinking about it is it's your ticket to

actually buy buy a ticket to to actually

place a trade. Whether you know, uh,

you're you're buying Tesla, whatever it

is, you're paying your stop-loss in

order to actually enter the trade and

look to participate in a strong trend.

And the best thing about this is and and

way of thinking about it is you get to

decide exactly how much you pay by

defining your risk based on the stop-

loss as well as the position size

itself. And sometimes if the trade works

in your favor, you even get your ticket

back. You get a nice refund as well as

get to participate in the trade. So

don't think of stop losses as a negative

thing. Don't fear them. Thank them.

They're there to protect you if the stop

if the trade goes sour and doesn't meet

your expectations. And any experienced

trader like Ry said uh will tell you

that the number one rule to cut is to

cut losses short. And every single

person in the market wizards book talks

about risk management. Risk management

risk management. They all have different

ways of approaching it especially

depending on you know the hedge fund

managers you know manage risk in a

completely different way than we might.

Um but risk management at its core is so

so important and stop losses are key uh

for uh retail traders. Um and I think

this is really important as well. We

can't predict the outcome of a trade. We

don't know if something is going to be a

win or a loser. Uh but we can decide how

much we're going to pay to try it, how

much we're going to pay for this ticket,

pay for our stop-loss in order to have

that insurance to make sure that, you

know, we don't get completely set back

if the trade uh does fail. And you know,

last last webinar uh in the previous

ones, we talked about entry tactics that

allow us to design our our stop clearly.

You know, the low of the day, the higher

low, key level, and that is what defines

how much you're willing to risk on any

single trade. And we've got a nice

graphic here. Again, these are kind of

edgy tactics. They allow us to define

our risk within an overall setup within

an overall strong stock. You know, you

could picture this being a stage two

uptrend. This is just a base within

that. And then you've got a higher low

break above this pivot uh before the

base pivot. This is your entry tactic

buying here, setting your stop at, you

know, the low of the day, low of the

week, higher low, a moving average, what

whatever it might be. You've got a clear

technical level that says the trade

fails. Um, and this distance between

your entry point and your stop-loss is

the amount that you're risking. Um, so

here's a little bit more on on this. Uh,

what we really want to emphasize, and

this is a key concept that Ross uh

really emphasized to me, and you know, I

love hearing him talk about it. Tight

and logical stop- losses. Basically, if

your stop-loss and the amount that

you're willing to risk is not tight and

logical, you're not buying at a proper

setup, at a proper buy point. And what

we mean by this is that entry tactics

allow us to place a tight and logical

stop stop-loss. They're frameworks that

we place on the charts that allow us to

define a clear technical level to enter

and a clear technical level to exit if

the trade fails. And a logical stop-loss

means that a violation of that level

would signal that the setup/ entry

tactic has failed. If you're buying

versus a moving average, a bounce off

the 50 SMA, a lower Ballinger band, um

you know, a a clear technical level, if

it breaks back below that level, that

tells you that that setup has failed for

that time being. Maybe it'll set up

again, but there's no reason to be still

in that trade. Uh so that's what's

really important here. That's what the

logical part of this means. Uh that

level, that stop-loss level should

signal that the trade failed. So here

we've got a breakout example. We buy

through here. If it reverses back down

and closes below this higher low, that's

breaking the expectation that we are

starting a new trend and continuing on

with this higher, you know, higher time

frame trend here. The next part of this

is tight. Uh if your stop isn't tight

enough, then it's not really a a uh

proper buy point in the first place.

You're not really buying at a spot where

volatility is lessened, where we're

we're expecting this nice uh resumption

of the trend, reconfirmation. Uh so

basically what we'd like to do is the

stock will limit losses to just a few

percent. Obviously this is dependent on

the ADR of the stock as well. Uh but

just in general we'd like to keep it

within a few percent. And if you can't

place both a tight within you know

within a few percent as well as logical

meaning uh a violation at that level

would break the expectation. Then if you

can't place this type of stop then there

isn't really an entry tactic. There

isn't a real setup there. Wait and be

patient because they will set up again.

they will allow you to manage risk at

the next proper entry tactic. So this

this concept tight and logical stop-loss

is something you really want to

internalize and always be thinking about

before you make a buy decision. Always

think about, you know, am I able to

place a tight and logical stop here. If

you if you if you can't likely you're

buying extended after a stock has

already moved from a proper buy point.

Um and you just have to wait for the

next uh the next potential entry. Uh Ry,

anything you want to add on on this

concept? tight logical stops.

Yeah, the more the more that you do

this, the more success you will see. Um

the you know, one one thing that Ross

has taught us, like uh Richard said, is

if the a setup is, you know, a

culmination of a few things coming

together for you to define risk at the

end of the day. And if you can't do

that, then it's not a setup or a pattern

or anything, right?

any trading pattern or any formation on

the

charts gets a name because you can

define a stop-loss along with the entry

um uh you know the at the the pivot

point as well. So, it's super important

because we see a lot of beginner traders

just come in to the markets and traders

turn into investors when they don't have

a stop. The whole function of what

they're doing changes because a stock

that they bought at 4 40 is now at 30

and now they view it as a long-term

investment. So, be very clear that you

know if you don't have if you can't

define your stop, it doesn't matter.

I've missed many many opportunities in

the market because I can't define my

risk but I've survived long enough to

see the other end of it where it's very

beneficial uh to be trading that way

even if it means that you miss some

trades along the way right uh like I

said earlier you won't you know not

every type of setup will fit your risk

appetite or the open risk that you want

to have in the markets so not every

stock will meet the criteria or you know

u be in line with how you want to trade

the markets as well. So if a stock has a

ADR of 8 or

9%. Personally I don't want to be

trading those type that's too volatile

for me. 3 to 6% 3 to 5% is doable. I've

learned how to manage risk on those ones

and I I'm more comfortable in those.

Right? And you may be different. Um, you

know, it is all about defining, you

know, where you think the tight and

logical stop is and what kind of open

risk you can stomach and what kind of

volatility you can stomach at the end of

the day. But the the main thing that

we're trying to emphasize today is that

if you're not placing stop losses,

you're setting yourself up for failure.

as we'll show in like a chart as your

losses get bigger the percentage to get

the even gets you know

asymmetricly worse uh for you as the

longer you hold a loser. So yeah and

there's a good question from Ankit in

the chat you know and it's a good it's a

good it's something good to talk about

here. So say this is a pretty volatile

name. It's got a ADR of 5 6% you know on

the higher end of things and this right

side isn't quite tight enough for you

know a VCP. Uh you know you can't manage

risk within 3%. What you can do is then

position size smaller. So again there's

three different ways that we control

risk. And two of those are your stop

loss and the position size itself. So,

if you want to trade and enter a name

that is a little bit wider and looser or

just more more volatile in general, but

there's still a valid pivot point in

setup, uh, what you can do is just

instead of taking maybe your typical 15K

position or 10K position, you lower that

to 8K or 5K and still participate in

that move if it's set up properly. Um,

all of that. Um, so you know, it's it's

really important to remember that

there's there's different le levers that

you can pull to manage your risk on

individual individual positions as well

as uh you know, your total portfolio as

well. And this is the chart that Ry was

talking about. This is why it's so

important to keep losses small. You've

probably seen a version of this chart,

you know, quite a bit. Uh, but you know,

it's important to reemphasize that

losses work against you and the bigger

they get, the the more the tougher they

are to recover. And this is both from a

portfolio level as an individual

position level. Um, you don't want to be

a sore loser. Work the math. Manually

cement this concept psychologically. And

you always want to set a max

non-negotiable stop-loss rule today and

make sure that you don't, you know,

overcome that. Uh, and this column right

here is basically a percentage loss. And

again, this could be on a position or

your total

portfolio. Uh, and then this would be

the after you experience that loss, what

you would require to simply get back to

break even. So at 1% you barely have to

make 1% back to get back uh that 1%. 2%

again very minimal more amount that you

have to get back. Even up to 5% it's

very minimal. But then once you get

above 7% and really above 10% you can

see how the deeper the draw down on a

position or your overall portfolio the

more you have to gain more uh to to get

back to simply where you were. So, you

know, you don't want to be in this

territory right here, especially not,

you know, sitting through a 30, 40, 50,

uh, you know, 75% decline. We saw many

of the prior 2020 uh, winners in the

2022 bare market fall 60, 70, 80, 80

plus percent. You don't want to sit

through that. You want to have rules,

stop losses, sell rules that protect you

and keep you in this territory right

here. Your first loss is your best loss.

you want to keep your loss as minimal as

possible because because then you just

need one or two trades to get that back

uh just with some small winners. Uh so

this is a really important chart and

definitely if you haven't seen this

before, you know, take a screenshot of

this, think it through. Um and the key

point is is the bigger your loss gets,

the more you have to make back um by

quite a bit uh just to get back to where

you were and to get to back to break

even. All right.

And the flip side, you know, this is the

financial component to it. You have to

work a lot harder to make it back. But

also, taking small losses is mentally

just, you know, an easier thing to do.

Uh, small losses do sting. You know, I

won't say that small losses are fun. Uh,

but large losses are devastating and

really hurt your confidence, which is a

huge part of trading. Um, it, you know,

a big loss you'll have to take, you

know, take a few days, take a week. If

it's a really big one, take a month, a

few months off to really be right again

mentally and be ready to get back in the

game and uh, you know, work your way

back up to where you are. Um, and

executing well and taking a loss should

build confidence. Um, you know, losses,

you know, I I take more losses than

wins. You know, my batting average is

typically under 50%. Um, and taking

losses to me, it's just a matter of my

system. It's just part of the process.

Um, and it's actually should build

confidence because if you're taking

small losses, you're risking man you're

managing risk correctly. Um, and even

after many small losses, and this is

what's key, even just one good trade can

quickly give you back that renewed

confidence. So, if you take a 2% loss,

3% loss, then a 4% loss, even one 8%

gainer, it might not get back to you,

get back get you back exactly where you

were, but you know, you'll feel, you

know, sharp again. and you'll feel ready

to go and ready to participate in uh you

know future trades. Um and this again is

the financial capital part of it. Uh

this is kind of an example with a 40%

win rate. So again losing six out of 10

trades. Um and you can see this is just

an example of you know maybe a section

of your portfolio uh and 10 different

trades. You've got a 3% loss, 4% loss,

5% loss, then a 10% winner, then an 8%

winner, then - 7 - 3.5 - 2, a nice 23%

winner, a 6% winner. So only winning

four out of these 10 trades. And the

result is you're up 20% on that section

of your portfolio. And again, your

batting average was 40%, your average

win was 11.75%, your average loss was

4.08%, your win to loss ratio, which is

your average win divided by your average

loss, uh, was 2.88. So you can see that

even with only winning four out of 10

times, you have really strong

performance. And again, you know, this

might be uh a section of portfolio, but

the goal is to do the same thing with

your total portfolio. And over time,

over the 12 months, just have, you know,

bigger winners than losers. Keep those

losers as small as possible because, you

know, optimizing for a very high win-

loss ratio. Um, you know, a very small

average loss ratio. That will allow you

to build in failure and have your

batting average be even, you know, 30%.

And a lot of the top traders in the US

IC, the market wizards who I talked to,

their batting average is pretty low, 30

to 40%, but they get 200% returns, 300%

returns because they let the um the

outliers run, let those gains, you know,

trend for them. And uh just a few trades

can really dramatically improve their

performance over time. And the rest of

the trades are basically scratches, you

know, minus 2%, - 3%, minus 4%. And in

the long run uh their winners are much

stronger than their losers. So small

losses is almost more important than big

gains. Although big gains definitely

help. Um and this is the aspect of

trading that we can control. The small

losses. We can control this um pretty

pretty regularly versus the big gains

will just kind of happen every now and

then in the strongest market conditions

and the strongest stocks. And what's key

here is only a few good trending you

only need a few good trending winners

can make up for a lot of paper cuts. and

you just want to build in failure and

expect to lose. Uh Ry, anything you want

to add uh on on this fact, batting

average or uh you know how effective

keeping your losses small can be um over

time with your performance? Yeah, there

will be a lot of frustrating times where

even the 10 out of 10 trades type

example, you just are stringing together

losses. Now, just imagine that each of

those losses were more than 7%. You're

big digging a bigger hole that you have

to climb out out of.

Um, and it gets infinitely harder to do

that because you'll need a ginormous

winner to get you out of it all at once.

And that's the mindset that traders

start to take after they kind of acrewue

like a series of losses in a row. And

that's part of of the game. It's it's

going to happen where no matter what you

do, you're you're still not seeing a

particular profitable trade. even if

it's the same system or uh you're

trading within the market cycle and

things are just not working out for you.

And the only thing that could save you,

you know, where that 11th trade turns

the tide is if you survive for that 11th

trade. And then the only way to survive

that is to keep them below 7% because

you don't want to dig a deep hole uh to

to climb out of. Right? So a 2% loss I

would take any day of the week. a 3% you

know I get way too concerned if it's

past you know 3% for me basically it

tells me that the setup that I

anticipated to work for me is not

working for me and I need to get out

regardless of what the stock does after

I sell does not matter to me because

what I planned and how I enter the trade

the entry technique that I use allowed

me to minimize my risk and if a stock is

not working in my favor it's not working

in my favor and I have to just move on

to the next trade. Is it a good feeling

that you know you sell something and

then you see it rally um over the next

few days? It's not the best feeling. Uh

do you want to get back into that name?

Yes. Right away. Uh but that creates,

you know, a loop, a neverending loop

where you'll start buying when you're

not supposed to. You start selling when

you're not supposed to. and you're

trading off of emotions and not a

system. So what we spoke about in the

previous webinars with entry tactics,

setups, the phase you're in, open risk

and all of that, all of these components

come into play for you to be successful.

And one of the most important ones is if

you let your, you know, losers get past

7%, you're mathematically

um at a disadvantage to be successful.

So, you know, maybe in the chat you guys

can put, you know, what your max loss

is, uh, with your current entry tactics,

what kind of, you know, uh, losses

you're taking on average. If you know

your numbers, you have to know the

numbers that Richard's put up on this

slide, your batting average, your

average win loss, and the ratio of that.

If you don't know these, you should

probably not sign in, you know, take a

cash position and look at the last

couple of months and last couple of

years and calculate these numbers

because the proof is always there as to

why you are successful or why you may

not be successful. And this is the basis

for everything. Right now, you will

start thinking statistically. Some

people do that because they have an

engineering brain. Some people don't

have an engineering brain. But just

looking at the numbers will allow you to

deliberately, you know, be more patient

when you have, you know, a string of

losses or just be more patient with your

winners because you know that your

average winner, you know, when you catch

it early in a market cycle tends to be

that 10 15% range is not where you're

supposed to take profits. So there are

infinite number of benefits for you to

be tracking these five numbers. Um and

we'll tie you know the average win and

the average loss into the market cycle

webinar that we will do and it's very

beneficial and it keeps you really in

tune with is it what kind of market are

we in a choppy market a trending market

a market where you're supposed to be you

know directional is is there's no

direction up or down um as well and

we'll be using these numbers in in

future webinars as well. Yeah, and we'll

show you exactly how to calculate this

and we'll actually be building it into

the DV journal to calculate these for

you as well as the total open risk. So,

we'll make it really easy in DFW, but

until then, we'll show you how to

calculate these uh manually in Excel. It

doesn't take too long to set up. And

like Rice said, definitely worth

reviewing your last year of trading.

Keep track of your your batting average.

Has that changed during different market

environments. That can almost be a tell

for you. um as well as tracking your

average win is really critical because

uh you know sometimes there's

environments where things are just

trending and really working and then

that average win will be increasing over

time. Um and that average loss for me is

actually pretty consistent even during

those times. Uh but you know tracking

the average win and batting average

helps me keep track of the current

situation and environment. All right, so

defining a stop loss. Let's get a get a

little bit into it. These are kind of

the key steps. Uh first when you've got

a potential setup uh check your entry

point and logical technical stop.

Calculate the percent distance before

them or ADRs if you like to think about

it in that way to account for

volatility. Uh know the dollar amount of

your portfolio you want to invest and

then simply multiply this dollar amount

by your stop and check if you're taking

up too much additional portfolio risk to

take the trade. Uh if the total risk is

going to be 1% of your account and you

don't want to take that on a single

trade or you don't want to add that to

your total open risk, then you either

have to not take the trade, choose a

different stop, or lower the position

size. It's as clear as that. Uh and you

just want to investigate why it doesn't

meet your risk parameters. Um and but

these are kind of the key steps to

define a stop-loss. Um so this is an

example here. Say the entry here is

around 100. The stop is at maybe the low

of the prior day at 96.5. Uh, and you

just basically want to ask yourself this

question. Is this a proper setup? Uh,

and here if you can't manage your risk

tightly and logically, you're not

executing a setup. We just want to

reemphasize that. But doing the math

here again, your entry is 100, your

stops at 96.5, that percentage risk is

3.5%. Uh, and say you want to take a 15%

position, uh, then you're risking just

over, barely over 0.5% of your total

portfolio. Um, and that's kind of the

sweet spot for me. Everybody's a little

bit different. I like taking a slightly

smaller stops than this to get this more

to uh 20%. But again, this is dependent

on your experience, how well you can

manage risk, how well you can pick good

tight entry points. And we'll have some

guidelines on position sizes uh later on

in this webinar. Uh but you can you can

also think about it in total uh

portfolio amount that you have at risk

for any single position. But that's just

a basic example of defining your risk on

a single position on a single trade. So

here are some initial stop guidelines

both for swing trading and position

trading. For swing trading, you want to

be a little bit tighter, a little bit

faster. 1 to 3%, maybe 4%, raise stop to

break even, 1 to 2 R. Um, especially,

you know, taking in account the market

environment, maybe a little bit less

during trending environments. And this

is kind of key, and I think somebody

will probably ask this in the in the

chat. You know, 1 to 3% is pretty tight.

What about, you know, a quantum stock

that has very high ADR where it can move

that in about five minutes? Uh well, you

know, you just basically want to take

that into account and instead of, you

know, keeping it here, you can increase

your stop percentage, especially if it's

still technically valid, but just

decrease your position size because it

doesn't take much to really uh move the

needle in that type of name if it really

gets working. So, a small position size

can still uh benefit your account. Uh

so, with high ADR names, you basically

just want to adjust these parameters. uh

you know basically this is kind of 180R

and maybe for that you know you you move

it up to five 6% and then decrease your

position size from maybe 10K to 8K uh

and make that adjustment that way. For

position trading you want to keep it a

little bit um a little bit wider to give

the stock benefit of the doubt. Your

initial stop might be 3 to 5 to 6% and

you can be a little bit slower to raise

your stock uh stop to break even two to

three R. And you know here maybe your

stop is the low of the day on the day

you enter. Maybe it's the low of the

previous day. Maybe it's, you know, on

undercut and rally. Um, here it might be

the low of the week or the low of the

past two days or the moving average. You

know, Ross Roy likes to use the uh, you

know, the moving averages to as they're

curling up up the right hand side of a

base as his stop loss and that's how he

likes to position trade. Uh, so

depending on your style, swing tra

position trading, you're going to have

slightly different statistics. But, you

know, for swing trading, you're going to

be taking tighter stops. But if we go

back to the

math, your bat your average win is going

to be a little bit smaller because

you're taking profits faster. Whereas

with a position trading, you know,

approach, your average loss is going to

be a little bit bigger, but your average

winner because you're going to benefit

from those longer trends, month-long

trends is going to be higher as well.

So, both both systems, both processes

can work. Position trading is more for

people doing this part-time uh who maybe

are working another job, while swing

trading, you have to be a little bit

more active and a little bit more

aggressive as well. Um, Ry, anything

else you want to add with in terms of uh

guidelines for stops uh based on the two

different approaches, swing trading

versus position trading? I think you

covered uh that well. Cool. All

right. All right. Adjusting stops. So,

say you know the trade is successful, it

starts working, it pushes higher out of

the pivot. Um, you know, when do you

actually adjust that stop loss up? Uh,

basically, uh, like I said, you know,

guidelines raise to break even around 1

to two R for swing trading. you know,

two to three R for position trading. And

you want to kind of keep raising it as

the stock makes progress for you, but

you don't want to choke off the trade,

as as Mark Winteri likes to say. You

want to give it room to breathe, natural

fluctuations. And what I like to do is

as soon as my as soon as the cost or the

21 EMA rises through my cost, so you

know, the stock is rising, the 21 EMA is

rising. as soon as it's above my cost,

then I'll, you know, transfer over to my

longerterm sell rules, uh, you know, two

closes below the 21 EMA as my stop and

just kind of trail that, update it every

day or every few days depending on how

much profit cushion I have. Uh, but just

in general, you can tra you can tra uh

trail your stop at moving averages, um,

ATRs from the current, uh, price of the

stock, um, you know, SMAs, um, all those

are valid ways, higher lows. uh you

basically want to define for yourself

how uh the uptrend is going to continue,

when will it end, and basically put your

stop at that point where the trend would

end for your style, for your objective,

for your time frame in the

markets. Uh moving your stop to break

even, just getting a little bit more

into that. Uh again, this depends on

your style. Swing traders should be

quicker. Uh position traders can give a

little bit more room uh to wiggle. Uh

guidelines, profit uh of one to two risk

multiples, you can move adjust your stop

to break even. And again, in faster

markets, choppier markets where things

aren't following through very volatile

environments, you can be a little bit

faster with this. Uh, but you know, you

don't want to choke off the trade by

moving it up too soon. You want to give

it a little bit of room to work because

sometimes a stock might not break out

the the the first day when you expect it

to, but it might recover and, you know,

re-break out the next day and follow

through. Uh, so yeah, again, uh, in

chopping markets, just be a little bit

faster with moving up to break even. And

you'll kind of learn and gain a feel for

this when that's appropriate, when it's

not appropriate, uh, you know, by going

through different market cycles. All

right, trailing stops. Again, uh,

depends on your style. We talked about

this uh, with relevant higher lows. One

one thing that I like to do as well is

if we get a move higher, a higher low

forms, a range, maybe it pullbacks the

10 EMA, and then it rebreaks out through

that short range, I like to put my stop

at the low of that breakout day. This is

a something I learned from Oliver Kell

called an ignite bar. when there's a

massive candle that really uh puts in,

you know, a statement day, it shouldn't

break that low based on my style. So, I

like to move my stop up to just under

that higher low. And again, you can use

moving averages, um, and higher lows to

manage your risk, whatever kind of works

for you and how you view the markets.

And then one thing I think is really

worth emphasizing here, um, use alerts.

You can put alerts, you know, early

alerts as it's approaching your stop

level. You can put it above moving

averages, higher lows, so that you're

aware of everything that's going on on

the stock, excuse me, if you're working

full-time, you can still keep tabs on

charts simply by using alerts, and that

way you're not notified on your phone or

email or whatever uh when you actually

need to go ahead and look at the chart.

So, alerts are free. Definitely go ahead

and make use of them in your platforms

uh to keep tabs on price so you don't

have to be watching this the chart uh

every single hour of every single day.

All right, stops on multiple positions.

This is a question we get often. Um,

this is how I personally approach it.

Uh, Ry, I want to hear your take on this

as well, but basically, if I have an

initial position, maybe I start at 10%

or 15% position here and then it pushes

higher, pulls back to maybe a 10 EMA or

21 EMA and rebreaks out, I might add,

you know, 5% less than my initial

position here. Um, but I kind of treat

them as two different trades until it

makes significant enough progress where,

you know, maybe we're all the way up

here and, uh, it makes sense to kind of

treat everything as one position. But,

you know, if if this fails here, I don't

want to move my stop up here too quickly

and just get stopped out of here. So, I

want to kind of treat them as two

individual trades until there's

substantial enough progress um you know

from that second buy point uh to

actually combine them and and and move

my stop as one for both positions. Uh

so, this kind of depends on your style.

I think there's there's traders I've

talked to who do it both ways. But, Ry,

any thoughts on this? How do you kind of

go approach this if uh you have an

add-on buy? Um how how quickly do you

kind of treat that as the same position

and adjust your stops accordingly? You

know, altogether?

I I always uh treat it I would say

separately not not the same at all. Um

only when the the 21day moves above the

average cost once again is when I will

treat it as one position because that is

how I manage trades that are up you know

20 25% for my entry. Um but unless that

happens, these would be two separate

trades and two separate position sizes.

The position size for entry two will

always be lower than the position size

for entry one. Um just so that the math

works in my favor. Um and I always keep

them separate for the most part. So

yeah, I see a question that's pretty

good uh from Harish. Uh do you guys use

broker stops or mental stops? I put

stops in with my broker. Um I've talked

to traders USIC, you know, top

performers who do it both ways. Some do

mental stops, some have stops on their

broker. I personally just I like having

that safety net that know if you know I

lost, you know, connection or something.

I've got a uh you know a stop-loss in to

protect me. Uh but I know for instance

Oliver Kel uses alerts and and uses more

mental stops, but he's in he has that

discipline. He he knows exactly, you

know, what his was risk is and he's able

to take that. So, know yourself. Know if

you're able to use mental stops, know if

you're you're better off using hard

stops. I think probably everybody

starting off is probably better off

using um hard stops on their broker. Uh

Ry, do you actually use I actually don't

know this. Do do you use hard stops or

use mental stops? Personally, no, I I'm

actively at the desk. if if I'm going to

be away on, you know, vacation or away

from my phone, that's when I'll

configure stops because you never know

with the markets. But if I'm around, you

know, I'm always uh looking on my phone

um as to what the market's doing. Um so

for me, it's not, you know, I don't I

know that, you know, if you're working

part-time, it's always good practice

that you enter and then you place your

stop. you may be in a meeting, you may

be, you know, out for lunch, you don't

have time to access your phone while

you're talking to your boss. Um, so in

that case, uh, you know, I used to be in

that situation myself. So stop losses

were super useful, um, then and now now

it's just, you know, I'm at the desk, so

that's why I'm not placing them

explicitly. Awesome. All right. So this

is another question that we're probably

anticipating. What about gap downs? how

how do we manage risk here? Um, gap

downs will happen. I've I've had gap

downs that take out my stop and then

they recover and then they go. But I

think the key thing here is we we have

to manage risk in real time. A stock

could just as easily gap down and keep

going and it breaks below the base and

then it breaks the 200 SMA and then

again you're an investor when you should

have been a trader. Uh you got to take

your loss when it's as small as

possible. U but just in general I think

gap downs happen less often than you

think. um you know during good markets

you know during this type of environment

there it's a more volatile it's more

prone to headline risk it's going to gap

up and down but in a stronger market

environment these happen a lot less than

we think and what's important to realize

is that these are negative expectation

breakers a gap down suggests that you

know people are selling and the

short-term momentum is to the downside.

Uh so you know honor your original

stop-loss as well as you can. Um think

again in in a series of trades, 100

trades, 200 trades. Um and you know

preserve the majority of your capital

and move on. It's okay. You know you're

able to recover from a small loss.

You're not able to recover from a 50%

drop in a position where you should have

taken the stop at 5% or 6% because it

gapped down below your 3% stop loss. So,

honor your stops uh and just, you know,

take your small loss when you've got it.

Um then of course there's you like this

animation, right? Uh an even bigger uh

gap gap down. You know, we just

experienced this with um the Deepseek

news. Um there are a lot of names that

were leaders that were acting well. GEV,

Nvidia that gap down 10, 15, 20% in a

single day. These will happen, but

again, not as often as we think. uh you

know, we've got recency bias because it

it just happened. Uh but again, this is

just part of the process, part of

trading and you just got to kind of exit

and preserve your capital as best as you

can. Um you have to realize that the

money loss and the gap down is gone. Uh

this is a list of a few, you know, big

gap downs that people may have

experienced recently and over the past

few years. And think to yourself, you

know, how would a trading champion

handle the gap down? uh you know would

they take their loss and just move on or

you know would they you know hope that

it returns um and you know hope is not a

strategy. Uh we want to you know we

manage risk here and now. Um and this is

also why it's critical to use our other

lever position sizing to manage risk as

well. We don't want to take enormous

positions because a gap down could

happen. Uh you know a CEO could have a

stroke and then the next day uh the

stock could be down quite a bit. They

could miss earnings. We want to take

steps to manage our risk as best we can

both with our position sizing as well as

our stop-loss. Uh and during a gap down,

uh your stop loss isn't going to help

you. Uh but your position sizing is

going to make sure that it's not

disastrous to your account. Maybe it

sets you back a few weeks, maybe even a

whole month, month or two, but you know,

you'll a you're able to recover that.

And again, we're doing this for years

and decades. We're not trying to think,

you know, in isolation. This one trade

is all that matters. uh we want to think

long term and uh you know just take our

loss uh when we've got it. Uh Ry,

anything you you want to add here with

uh experiencing gap downs, large gap

downs, how you personally think about

going through it.

Yeah, I mean they they will happen. They

don't define your trading. Um that's why

you know wacky position sizes where you

place 80% 50% 60% of your account in a

single position especially when it's

um stocks and equity right um these

companies can report something in terms

of guidance and things overnight that a

technical chart will just not tell you

uh sometimes. So when that happens the

core of your system which is you know

don't place all your uh capital in one

name which can work uh at times but if

you you know hit one of those CRDOS's

and overnight you're losing you know 80%

of your portfolio then that's not the

best either. So there's always two parts

to the equation that yes, when you're

right, your portfolio will move up quite

a bit, but when you're wrong, are you

going to survive the next day? Right? So

that's what's most important is the

longer you survive, the greater the

chance of you having a profitable

system. And once you have a profitable

system, it becomes an income for you. Um

uh you know, the trading becomes a

source of income. So, um, we've

experienced this. I've experienced this.

The way I handle it is I sell.

Um, if you know, if if I own a stock and

it gaps down 20% tomorrow, I'm not going

to question why. I'm not really looking

at um the news to justify that it may

come back. Um, I don't tend to do any of

that kind of stuff. I don't turn into an

investor all of a sudden that now I'm

holding these and it will come back in a

couple of quarters. Um because I'm a

momentum uh swing trader. So I know

that, you know, I lost this one and I

have to take it to the chin and I have

to move on because that capital, you

know, it's not going to happen, you

know, 10 trades in a row. I'm not going

to hit a CRDO or FSLY and Nvidia or a

Deepseek type of situation. These just

don't they're rare. Uh and the most

important part is you can't you know the

position sizing of a single name can't

def you know should be so high that

tomorrow you won't survive. That's the

most important lesson that you'll learn

uh out of these situations. Yep.

Awesome. So let's get into position

sizing now. Again another one of the

levers that we use to manage risk. Uh so

first things first uh you need a system

based on your experience level. Um, it's

like I've used this analogy before, but

it's like going to the gym for the first

time. You don't come out out the gate

and put 200 lbs on the bar and expect to

not hurt yourself, right? It's the same

thing with large sizes. And this is, I

think, one of the big reasons why people

quit is they size too too big, too fast,

with no system, no risk management, and

they destroy their account and blow up

their account. Um, you have to earn the

right to size up. And part of earning

that right is learning proper

techniques, learning how to place stops,

learning the proper buy points that

allow you to place tight and logical

stops. So, you have to earn the right to

size up. You don't want to just start

off taking 50% positions, 20% positions.

You got to work yourself up to that

level and build up that technique first.

Um, more advanced traders, as we'll get

into, can adjust based on the number of

edges in play. So, if a stock is higher

potential, you want to contribute more

of your risk to that name. Um, and the

less positions, I think this is also a

way to almost manage risk, the better

you can manage them. So, it might be

counterintuitive that, you know, taking

less positions is less risky, but the

reason it's less risky is because you're

still managing risk with stops and

position sizes, but you can execute

better on your plan on those names. And

again, just want to emphasize, don't

size up too fast. You got to earn the

right over multiple market cycles that

uh you basically proved to yourself that

you've managed the risk. uh you know how

to handle gap downs, you know how to set

initial stops, you know, in your sleep,

all of that. Don't size up too fast and

set yourself, you know, back uh trying

to perform when really your goal should

be about building process. Uh first, uh

position sizing with momentum. Um again,

you want to scale up as you string

multiple wins in a row. Listen to that

market feedback. Scale down as that

market feedback turns negative. And very

importantly, and we'll get into this

really in depth in the market cycle

webinar, trade feedback is the market

communicating with you via wins and

losses about whether your style is

working in the environment. And we want

to use that as feedback and you know uh

position size accordingly using

progressive exposure. Uh so here's

getting into uh some guidelines here.

Trade your biggest when the market is

cooperative and within when within your

system. You know, think about the

periods where you've really moved your

account big in and you know strongly to

the upside. Uh was this the market above

moving averages when that happened? What

did net new highs, new lows look like?

You know, define for yourself what a

strong market period looks like. Uh and

then trade your smallest when the market

isn't cooperative to minimize loss of

capital. Thinking it back to this

current correction that we're

experiencing. We're below the 200 day.

We're below the 21 EMA and we're really

volatile. High big ranges up and down.

Is that cooperative with the system

that's trying to manage risk tightly

with losses and focusing on stocks and

uptrends? Not necessarily. So, you want

to position size accordingly to manage

your risk if you are trading. Um, and

then stacking up probabilities,

correlating the number of edges of uh

correlating the number of edges with

sizing consistently. Again, we'll get

into a whole slide on that and Ry, I

think you explained that really well.

Um, and then it takes time to experience

uh and experience the trade size. Again,

you're building that technique. You're

building that process, your system

first. It's not about, you know, in your

first three months you can suddenly uh

manage, you know, 50% positions. You

have to earn that right if you even get

to that point. Uh, you know, some people

are much just much more comfortable with

20 30% position sizes. Uh, pace so pace

yourself. Station traders can trade big

size and win big, but then give it all

back and lose big. They don't know how

to position size correctly. Uh, they

just know how to position size big.

There's a fundamental difference. And

you can have low volatility equity curve

profile and size 25 to 30% or even more

position sizes positions consistently.

It all boils down to the entry tactics

you use, how you build into that size,

and how you manage risk on the entry

area. And Ry, I definitely want to hear

your your thoughts on on this slide

because I I think you explain it really

really well.

Yeah. So with with position sizing, we

we'll tie this this concept into the

market cycle quite a bit. um and how

what we define as a cooperative market

and what isn't one. um that will become

really really clear uh for you guys and

will help you build that system in this

webinar series where you know you're

supposed to be completely out of the

market February 21st if you look at the

daily on the cues and you would have

avoided any of the you know the mess

that we're currently in because we're in

a down cycle for the past 34 to 37

sessions now. So um this one is you you

will see a lot of benefit in stacking um

up different edges. The reason for that

is that the market, you know, if there

are more positive factors at play,

they're catching different systems and

when the same stock is on radar for

different systems, there's more interest

and there's more momentum or directional

momentum to uh one you know the upside

in the markets. So the most important is

you know

um traders always ask you know what am I

position sizing because they want to

they want to completely emulate or you

know follow exactly what I'm doing um

because they want the exact same

performance and the exact same numbers.

The reality of it is that if I place a

25% position and a trader that just

started three weeks ago places a 25%

position, both of us will handle it

really differently when price moves up

or when price moves down. Right? So

that's where the phases come in. You

have to know the phase you're in. If

you're following someone on social media

or you're uh paying someone for a

subscription, look into the process of

how they're entering, you know, enter

how do they enter their names? Where do

they place the risk? How do they come up

with these names that they're looking

at? How do they build a focus list?

What's their process? But the position

sizing part of it comes down to

experience, right? If I place a 25%

position and someone else, you know,

that started a month ago places that

we'll have two different results based

on the volatility that that name is

seeing and there will be two different

outcomes purely based on experience and

nothing else. So that's a fact. You have

to deal with it. Don't try to replicate

position size. It's a huge mistake that

you know in recent years that has been

promoted that you have to start with you

know at 30%. You have to have huge skin

in the game for you to that's one way of

going about it but it's a surefire way

of reducing your success of getting to

stage three and stage four as well. The

probabilities don't align. It's almost

like you you start, you know, driving

and someone says you can only drive at

100 miles an hour to learn. Um, that's

not going to end well, right? The

probability of you being a a good driver

that you know the thresholds set and

that you can only be good, you can only

be great if you, you know, drive that

fast, it will end up in a wreck and

you'll wreck your trading career.

So definitely keep this in mind. Don't

try to, you know, emulate someone else's

size. Build it up. It will, you will get

there. And if you think that you can get

there in a year, it's really not a year.

It's 5 to seven, like we said, right? It

takes, you know, multiple market cycles.

the last five years I would say from

2020 if you started 2019 area you've

experienced everything that you possibly

can in a span of six years now that you

the market can potentially throw at

you've had the deepest corrections we've

had crashes we've had Vshaped recoveries

we've had long you know downward

trending markets for three to five

months in a row where they frustrate the

heck out of you've had a solid uptrend

in 2020 20 and last year. So, if you've

seen all of that, uh, and it's, you

know, you you've built, you know, you'll

build yourself up to this type of sizing

as well. The last thing I would say

is, you know, try to to not see

companies and trades you make as a

lottery ticket to to take you to, you

know, to to promised land. it you it

might work right a company just gaps up

overnight and it might work um but it

more often than not will won't um so

don't you know 50% I see 60% position

sizing for single names if traders are

doing that that they're playing with

money that they're willing to lose

that's a whole separate game but if

you're looking to build this as a system

as a source of consistent income you

know that you have a market cycle system

where you can aggressively make a lot of

money and then be out of the market for

a couple of months meaningful money

right meaningful dollars then stick I

would say within these thresholds being

your max above it it gets quite scary

and it's not scalable either so yep

perfect and then uh yeah you want to

take this one as well yeah so position

sizing um the first point you know is

boost lose performance if you position

size well. Uh what that means is let's

say we have two stocks. How do you gauge

potential? You gauge potential based on

the number of edges that you see on

those two particular charts. If chart A

has multiple edges and chart B doesn't,

should you be allocating more to chart A

or chart B? I would allocate more money

to chart A because the probabilities of

it, you know, having more edges means I

have more conviction, right? Um, and

this is something that I kind of, you

know, built for myself because I feel

I'm just I have an engineering type of

brain and a mathematical brain. And if

I'm seeing positive characteristics on a

particular chart and there's more on

that chart

A, you know, mathematically that chart A

should succeed and have a bigger gain

than that chart B. So that's why, you

know, you want to build that scalable

system so that chart A gets more of your

money versus chart B. Um the the fourth

one we'll cover in depth. We'll have a

whole webinar on market cycle. Uh and

then the last one I was already spoken

about. You have to tailor it to your

experience, your risk appetite, your

tolerance that you've built over

multiple market cycles. You know, you

could start at 5% position sizing. Will

it make a huge difference um in your

lifestyle and your trading in in the

first three to five years? Likely not.

But it will allow you to stomach

volatility a lot better. You'll build it

and then you'll be prepared in

corrections, you know, to be on the side

and just sit it out and then deploy

capital when it's super important um to

to do so. So all of these things play a

role. The most important thing on this

slide is, you know, you if you position

size based on the number of edges that

you see, you're it's just like that

losses chart that we put up, you'll see

the stats on the other side as well. The

more edges, the more higher your win

rate will be because that chart just has

better characteristics. So, yep. And

these are some guidelines for when we're

in a trending environment, cooperative

environment, we're above the moving

averages. Um, some general guidelines

that you can use. Stage one traders, max

stop loss about 5%. Uh number of

positions less than 10. Uh position

size, you know, 8 to 10 percent. And

again, if we're if you're just learning,

there's no shame in in trading, you

know, 10 shares, one share, even a much

smaller account that you could trade.

You know, if you've got a 100K at your

disposal and you're just starting out,

start with 1K. Start with $500 and learn

the process all of that when with much

less than your total portfolio. uh until

you prove to yourself and go through

multiple market cycles that you can

manage risk uh enter the strongest names

at the right time uh and all of that. So

this is kind of for stage one traders.

say true traders again max stop-loss

recommendations guidelines about 5%

number of positions less than 10 and

position sizing you can increase that a

little bit 12 to 15% and then stage

three and above you can get a little bit

higher but again you have to earn the

right you build up to this and you at

this point you'll kind of understand

what works for you maybe you want to

stay at 15% positions that's fine but

you'll have built the process and build

the risk management skills and system up

enough that you can handle you know this

amount amount of uh of size if you would

like to. Uh but you know uh these are

just kind of some guidelines, some

starting points, some reference points

for you guys as you go through uh your

journey. Uh progressive exposure, we've

talked about this a little bit and we'll

get a lot more into this in the market

cycle market analysis webinar. Uh

progressive exposure is basically the

act of increasing or decreasing your

total open risk and position sizing

based on trade feedback and market

analysis. uh you want to analyze the

market indexes, leadership and stock

gauges uh and recent trade feedback and

ask yourself, are you being rewarded for

taking new trades so you can look at

your past 10 trades like we did? What's

your win rate? What's the average gain

over the last 10 trades? Is that in line

with your your normal stats? Is it

better? Is it worse? And basically under

ask yourself, is the market environment

good for my style right now? Uh and then

based on that analysis, adjust your

sharp position sizing. uh you know, your

stop percentage, your activity levels if

you're even going to be taking trades.

You know, we're below the 200 SMA and 21

EMA right now. Uh probably for most

people, a lot less is more. Cash is

king, all of that. Um and also adjust

your sell rules to be a little bit

faster during more volatile corrective

conditions. Uh and then when the market

environment improves, when we've got a

follow-through day, when we break it

back above moving averages, when we

break back into a stage two uptrend, uh

we can adjust accordingly and get back

to uh more normal uh risk risk

parameters. So example uh of progressive

exposure if we have a fallrough day if

we have a break above the 21 EMA however

you define for yourself a new market

cycle you could take three 10% star

positions and if you get you know good

feedback 5% gain on each that's 1.5%

portfolio gain that then can be used to

finance new positions maybe that's uh

two new positions risking 75% of your

portfolio or three more risking 05% you

know of your portfolio The basically the

the rationale is you've got nice profit

here from these positions and you can

use that to finance um you know new

positions and new test trades. And again

we'll cover this a lot more in the

market cycle uh webinar. Ryan, anything

you want to add on progress progressive

exposure or just sizing sizing bigger

during you know strong periods and

sizing a lot less during corrections

like like the one we're in currently.

No, I I would just say, you know,

progressive

exposure allows you to get in really

effectively. Some some traders feel that

it is a little too slow and they want to

put more exposure on quicker, but it

caps your um in choppy markets, it's

super helpful in downtrends when you're

thinking that the trend is about to

reverse. um you putting on that you know

uh position seeing how it works if it's

working then you add more capital and a

second position on etc is super helpful

while you're building out a full system

right um it's almost like a it's buying

you time as you build experience and

progressive exposure as you build

experience you build this gut feeling

that the market's about to turn it

becomes a little less important But the

first 10 years of you, you know,

learning the ropes of the market and

um kind of developing a feel, it's the

best way and the best framework uh that

was put forth by Mark Miller Media,

right? Um you want to gauge and get

feedback. If you're getting positive

feedback, go and place more trades. If

you're getting still getting positive

feedback, continuously do that until the

market's telling you not to. So it's

almost like a way for you to buy time

without having uh the experience. So

that's the the framework that he came up

with there. Yeah. And then we definitely

wanted to touch on this as well and

we'll cover this more in the market

cycle webinar as well, but just thinking

about risk from a portfolio level and

talking about overall draw down. Uh over

here we've got a chart of the cues. Uh

this has been a pretty vicious

correction. Down 10% at that point, down

you know, 20 plus% at the lows. We

bounce. we're maybe breaking lower again

and probably a lot of people have

experienced maybe the biggest draw down

of you know their trading career during

this period. Uh so these are some

guidelines that you can hopefully use to

keep that draw down uh to a minimum

going forward. You know at 5% draw down

uh have starter position sizes sell your

weakest positions especially ones that

are breaking below moving averages. um

at 10% uh draw down you know this is

basically looking at your equity curve

and seeing if it dropped 5% this is the

first one 10% the second you know level

15% all the way down here and you know

as you gain experience or more stage

three stage four you can be a lot faster

than that because I definitely want to I

want to be much more you know closer to

this 10% uh possible draw down if we

enter a full correction and even less

than that uh so I can profit from the

next move higher uh But this is kind of

a good guidelines rules rules of thumb

here. So at 10% no new buys, raise stops

on existing positions and 50% you know

just go completed cash and and watch

because a 15% uh draw down in your

account it's definitely significant. It

hurts a lot uh but it's recoverable

right and the whole point for these

guidelines draw down rules is to prevent

a 20% draw down 25% draw down 30% draw

down 40% draw down. If you just watch,

you know, these growth stocks when the

market tops and enters a significant

correction, these uh these former

leaders drop 50% 60% 70%. And we don't

want to be along for the ride. We want

to participate during the uptrends and

step aside for the worst of the

declines. And these are some rules that

can help you from a portfolio level uh

you know keep those draw downs

manageable so that you can participate

and survive until the next uptrend. Uh

Ryan, anything you want to add on on

this slide or about overall draw down

and controlling controlling that when a

correction starts? Yeah, this is another

risk control mechanism, right? Because

traders tend to uh start to like

hallucinate or get these fantasies about

things will come back and then they

don't uh and then you know you put

yourself in a in a bad spot. This one I

think we picked up from Eve, right? Um

well, at least that's where, you know,

when I read something that she was doing

um from the IPO master essay, it really

clicked for me. Um you want to have

this. It's kind of like a circuit

breaker system for the markets. You know

how if the NASDAQ is down 7%, the

circuit breaker one level will trigger.

This is kind of a circuit breaker system

for your portfolio that hey, you're 5%

off the highs. Something's not right.

Maybe it's the market. So listen to what

the market's doing or trying to tell

you. At 10% it's kind of circuit breaker

too. Um I know Webster Mike Webster has

this kind of system as well uh for uh

portfolio draw downs. This should be you

know this is a top level you know

portfolio management. The folks that are

managing millions and billions are doing

this. Uh active growth money managers

are doing this. there's no reason for

you to not do the same. It's, you know,

just a simple circuit breaker system for

you to get out of the market to avoid

those deeper, you know, corrections um

as well. So, yeah, and this is this is

completely separate from the position

management rules that you should be

using for that the trades itself that

you're in. This is just from a portfolio

level. These are things you should do to

make sure you don't have too large of a

draw down. So, uh that's pretty much it

for today. Just some key steps for

managing risk. Um defi, you know, as

you're looking at a stock and a

potential trade, define if you want to

take more total open risk, define the

stop loss, the likely stop loss for that

position. Enter the stock right after

you enter, place a tight and logical

stop-loss um at a key level for for your

style. As the stock makes progress, you

can raise that to break even. As the

stock continues, you can raise that to

in the money even uh and trail your stop

at higher lows, key moving averages. Um

you can sell to strength, sell to

weakness. These are things we'll talk

about in uh this next weekend's webinar.

Uh concrete rules that you can use for

that. Uh but this is kind of the

framework that you could apply to any

trade that you take. And the the risk

management parts happen right here. Uh

and that allows you to control your

downside and um you know uh allow you to

profit from that trade if it does work

for you. Uh key takeaways today, risk

management is the key to longevity in

trading. Uh the three factors that you

can use to control open risk are the

number of positions you have, the size

of those positions, and the stop-loss

levels you set. Uh stop losses should be

tight and logical uh based on your

style. And with position sizing, you

need to earn the right to size up

positions. Uh you have to experience

multiple market cycles, go through that

process, learn to manage risk, learn

what a proper entry looks like uh before

you can, you know, size up and try to

perform. before that it's all about

building technique, building process,

building a system, uh, and, uh, you

know, learning to manage risk before

that. So, those are some key takeaways.

Let me let us know your favorite one in

the chat today.

And we'll pause here for a few

questions. And before we do that, I just

want to emphasize that if you haven't

already ordered your trader handbook,

definitely go ahead and do so. You can

scan this QR code to go ahead and grab

your copy. Um everything we talk about

in these webinars is expanded upon and

explained uh in in different ways in the

handbook itself. And the last 200 pages

of this are a full model model book that

you can use to study the greatest

winners from the past decade pretty

much. Uh so that allows you to you know

speed up your learning curve, learn what

winners look like, all of that and uh

you know place your entry tactics, study

how they would work in those winners. So

definitely recommend picking this up if

you haven't yet. And if in the in the

chat you've already placed your order,

let us know if you already picked up

your copy. Um, and let's see what these

key takeaways are. Circuit breakers.

Awesome. Uh, let's see. Uh, losers

average losers, 100%. Uh, never lower

stops, 100% agree. Never down for

sure. SoCal, uh, hey Mike, uh, he

ordered two copies. Awesome. Very nice.

Thanks, Phillip. Appreciate it. All

right, let's see. Ry, let let me know if

you see any good questions that we

should uh answer. Um, and Dr. Wish, uh,

in the chat, hey, hey, Dr. Wish. Um, he

emphasized never lower stops and never

average down. Definitely very important

concepts, uh, to to

remember. All

right. Yeah, I'm looking for questions.

I I don't see there's one about, you

know, how I manage positions and

different type of accounts. Um I just

have two accounts. Um I don't have six

but I am buying I I treat them

separately because they have different

objectives. Um you know you I tend to

treat my personal like trading account

as a pure momentum swing trading and

then you know your uh there's a tax-free

savings account in Canada that I have

which I treat a little differently. So,

it all depends on the objective of the

account, but I don't buy positions that

are meant for momentum trading for

investing, though. There's no crossover.

Uh, why not average down, Richard?

That's one of the questions. Because

you're the market's giving you feedback

that the the trade is not working. So,

why why would you add money after it's

already told you you're wrong? I would

much rather just exit if my entry tactic

fails. And then once the momentum goes

back in the way of my trade and there's

a new entry tactic, jump on on the next

point. If if you enter when if if you

try to average down, all you're doing is

hoping there there's no system. There's

no process. And that's not a

professional way to approach this and to

trade. Uh so we're again, we're thinking

in a hundred trades, 500 trades, a

thousand trades, 10,000 trades. We're

thinking in a series, a long series of

trades that we'll make over our career.

Not that this trade needs to work. and I

need to force something and make it do

something it's not doing. Um, the market

doesn't care what you think. If the if

the stock breaks below a pivot after you

entered, it's telling you that that

pivot failed and that entry tactic

failed and just step aside and and wait

for the next setup. Um, there there's no

real logical reason to average down at a

stock um for for our objectives for

swing trading for position trading. Um,

that's kind of how I approach it. And

any additional thoughts that you want to

add on that? Yeah, pretty much the same.

Uh the reason you would average down

when it comes to swing trading uh would

be purely out of ego and thinking that

you can make a stock do something that

it's not clearly not doing. Um the next

question it was how do you deal with

draw downs? So, um, dealing with draw

downs is mostly you either have to take

time off, you have to step away, um, you

you're doing something if it's part I'm

I'm a high believer in system and if you

have a system that you're executing, uh,

that system will tell you to step away

because things will not work. Some, you

know, as humans, we deviate from that

and we try to muscle the markets into

doing what we think it should be doing.

that's deviating from your system,

right? So, you learn those lessons along

the way. But the best one that I found

is if you have a series of trades that

are not working for you, you're doing

the same thing that you were doing

before. It's just the market's telling

you now is not your time. You have to

sit this game out or this market cycle

out and be, you know, ready for the next

one. Um,

yeah. How do you use shorts or hedges to

balance your long side exposure? That's

the next Yeah. Uh I think I I forget

which trader I heard this from, but they

basically said if you feel like you need

to hedge something, it's just a reason.

It's it's a sign that you should sell,

you know, sell at least some like um you

know, there there's different

objectives, right? There's people who

are looking to hold for years and they

try to they they hedge uh before

earnings. They hedge as a stock is

pulling back to the moving average.

That's not my game. My game is to step

aside when a stock starts pulling back

meaningfully. So um you know that's how

I do it. I think you know I I'm not a

professional in terms of hedging and all

that. Uh but you know when when a start

stock starts pulling back and breaking

structure and breaking trend I step

aside and either enter when it starts

going back up or just go on to the the

next one. Um I don't know. Anything you

want to add there?

um hedging at sca like at scale when

you're managing millions and um have a

really large portfolio makes a lot of

more sense. Um if you have a portfolio

that's small, it in my opinion is a

waste of time. You're just trying to

keep busy trying to approach everything

that hey I can't have a pullback. I need

to be in a winner at the same time. It's

a like just conflicting. I think

experience makes hedging a lot easier.

If you want to hold a winner with large

size over multiple earning cycle and

you're managing, you know, large amount

of capital, it's good. Um, and it's

actually kind of needed for you to sleep

at night. Um, but at small scale, I

think it's just a distraction. You

should concentrate on building a good

system. uh and be a very directional

type of trader, pick a direction um in

in the markets. So yeah, there's a

another question, really good one. Uh

can win rate be misguiding since market

conditions are such that you take trades

but losing

them? Did I read that right? Can can win

rate be misguiding since market

conditions are such that you take trades

but are losing on them?

Um I Richard you you want to make I I'm

not quite sure what he's asking. Can you

rephrase that? Yeah, no problem. Um and

one thing I want to say quickly while

while people are entering more questions

which please do guys hopefully every

every person here enters at least one

question. Um, part of risk management is

really what we'll talk about in the

market cycle webinar where keeping track

of that market cycle is kind of really

good defense and offense that allows you

to trade in tune. There's times to

trade, there's times to be completely

out of the market and there's times

where less less is more. So, um, keeping

track of the market cycle, are we above

or below moving averages on the indexes?

How are leading stocks performing? Are

there even leading stocks in the market?

All those are clues that will help you

manage risk by not trading and not

entering a market where the odds, the

probabilities aren't with you. So, you

know, currently again, we're in a

correction. We're below the 200 SMA,

back below the 21 EMA. Um, you know,

less is more in these type of

situations. And a market cycle system

will help you identify that in real time

so you can participate during the good

times and limit the damage during the

bad times. Uh, let's see here.

Um, does the handbook cover how to build

focus lists uh with good potential

winners, how to build build scans? Yes.

Um, there's there's an entire chapter on

screening and routines and we'll be

doing an entire webinar expanding on

that, sharing a lot of scans that we use

um to identify winners. Um and uh also

just talk about the process as a whole.

The process of scanning and building a

wider list, narrowing down the focus

list to a few names and then even

narrowing it further to the names we

actually want to trade because we get a

lot of questions about how to actually

build a focus list, a final focus list

and uh narrow it down because I think

that's that's something a lot of people

have an issue with. So uh definitely we

cover that in the book and we'll do an

entire webinar on that as well. Um let's

see here.

Consider current market condition which

is not conducive for breakout trades. Do

take trades when setup appears and fail

but keep trying. I think they may

improve. Uh so during during very

negative corrections, breakouts will not

work as effectively. So I try to find

earlier buy points or even pullbacks if

I am placing trades and always have a

clear spot where I can uh get out

quickly. And uh again, guilty until

proven is innocent. Um when uh when

conditions are like this. Uh Bob asks,

"What are edges?" uh go ahead and watch

our edges uh and setups webinar. We did

an entire webinar on that and cover the

edges that we look for like relative

strength um you know uh the end factor

edge all of those. So definitely watch

that webinar. Uh Ryan, any last bits you

want to

um say before we we call it today?

No, I I think uh you know the key

takeaway from today is have a max uh

stop loss. look at that chart where

after 7% things go downhill. Make that

decision and have that um know your open

risk and know the basic stats that we

spoke about and have a circuit breaker

system. Uh I think if you do do you know

one of those things from today's

webinar, I think you will be a better

trader over the next year and forever.

Uh because risk management is not

optional. You have to do it for you to

be successful for a long span of time in

the markets. Yep. Perfect. Uh well,

thank you everybody. Appreciate the

questions and your attention. Thanks for

tuning in. Uh if you enjoyed this,

please go ahead and leave a like down

below uh on the video right now on the

stream. Definitely appreciate that

immensely. Uh subscribe as well if

you're new. And if you haven't yet,

definitely go ahead and order your copy

of the Trader Handbook. It's coming out

uh pretty soon now, just in, you know,

about a month. So definitely go ahead

and grab your copy to make sure you have

it uh as soon as it comes out. And we've

got a lot of upcoming news surrounding

the release of that. You'll want to pick

up your copy to make sure you get

exclusive bonuses and uh resources as

well. Uh so definitely grab your copy if

you haven't yet. You can just scan this

or click the link in the chat or

description. But thank you guys all for

tuning in. Definitely appreciate all the

questions and uh great engagement as

well. So thank you all and we'll see you

guys in the next one this Saturday. So,

we'll stay on the lookout for an email

about how to register for that as well

as the link. So, thank you guys all very

much and uh we'll see you guys in the

next one. Cheers. Thanks everyone.

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The Ultimate Risk Management Guide for Traders (Stop Losing Big)