If you’ve read my previous post — “How Much Risk Are You Really Taking?” — you already know my view on risk:
Treat every trade like watching your cash burn in front of you.
Ask yourself:
💭 “Would I be OK watching this much money disappear right now?”
If your answer is yes, take the trade and move on.
If it’s no, don’t do it — resize it.
🚫 What Not to Do:
Many traders fall into the trap of:
“I’ll think about it later”
“I’ll set a mental stop and cut if it hits my level…”
That approach has two fatal flaws:
#### ❗ 1. Execution failure
You might not react fast enough when the market hits your level — or worse, you’ll forget to act at all.
#### ❗ 2. Emotional resistance
Even if your stop level is hit, will you actually cut?
Probably not.
Human nature avoids pain and chases pleasure.
Cutting a loss — even a planned one — is painful. That’s why mental stops often fail.
Mental stops:
Add more burden to monitor
Add more emotion to your decision-making
That’s why I keep it simple.
---
✅ My Risk Rule for Buying Options:
Every dollar of premium I spend is 100% acceptable to lose.
This way:
I don’t need a mental stop.
I don’t need to watch it every second.
I sleep well, regardless of outcome.
---
📊 How Much Do I Risk?
It depends on account size and account type:
#### 📌 Main Account:
Risk 1–2% per trade
Never more than 5% on a single trade
Rarely hold more than 3 trades at once
Targeting 6–10% total exposure, only if trades are uncorrelated
⚠️ SPY & QQQ are NOT uncorrelated — don’t fool yourself.
#### 📌 Small Account:
Can risk 5–10% per trade, but only on A+ setups(See: “What’s Your Catalyst?” for what qualifies as A+ in my book)
The goal of a small account is different: it’s about growth — but still must be strategic.
---
💰 “But How Can I Make Big Money Risking So Little?”
This is the common pushback I get:
“Shouldn’t we take big risks to get big rewards?”
Sure — high risk = high reward.
But high risk also = high chance of blowing up.
Even if you hit a few big winners, you’ve compromised your long-term survival.
That’s not trading. That’s gambling.
---
🧠 What I Actually Look For:
Low Risk / High Reward.
Yes, they’re rare.
Yes, they’re like lotto tickets.
But you don’t need to win often if you only risk a little and win big when it counts.
What’s not rare is:
Traders risking big on uncertain setups
Going all in on gut feelings
Wiping out in one or two bad trades
That’s not strategy — that’s self-destruction.
---
🧾 The 2 Core Rules of Risk:
Protect capital at all costs
Only take trades where potential reward outsizes the risk
Don’t flip the logic.
Too many traders hear “high risk = high reward” and assume high risk is required.
It’s not.
That mindset is built for Vegas, not for Wall Street.
---
🧠 If You Want to Be a Trader — Not a Gambler:
You must believe in:
Small risk, big reward
Patience
Discipline
Letting time and luck compound your edge
No other way.
🎯 If you truly get this… congrats.
You’ve crossed the line from gambling to trading.
Treat every trade like watching your cash burn in front of you.
Ask yourself:
💭 “Would I be OK watching this much money disappear right now?”
If your answer is yes, take the trade and move on.
If it’s no, don’t do it — resize it.
🚫 What Not to Do:
Many traders fall into the trap of:
“I’ll think about it later”
“I’ll set a mental stop and cut if it hits my level…”
That approach has two fatal flaws:
#### ❗ 1. Execution failure
You might not react fast enough when the market hits your level — or worse, you’ll forget to act at all.
#### ❗ 2. Emotional resistance
Even if your stop level is hit, will you actually cut?
Probably not.
Human nature avoids pain and chases pleasure.
Cutting a loss — even a planned one — is painful. That’s why mental stops often fail.
Mental stops:
Add more burden to monitor
Add more emotion to your decision-making
That’s why I keep it simple.
---
✅ My Risk Rule for Buying Options:
Every dollar of premium I spend is 100% acceptable to lose.
This way:
I don’t need a mental stop.
I don’t need to watch it every second.
I sleep well, regardless of outcome.
---
📊 How Much Do I Risk?
It depends on account size and account type:
#### 📌 Main Account:
Risk 1–2% per trade
Never more than 5% on a single trade
Rarely hold more than 3 trades at once
Targeting 6–10% total exposure, only if trades are uncorrelated
⚠️ SPY & QQQ are NOT uncorrelated — don’t fool yourself.
#### 📌 Small Account:
Can risk 5–10% per trade, but only on A+ setups(See: “What’s Your Catalyst?” for what qualifies as A+ in my book)
The goal of a small account is different: it’s about growth — but still must be strategic.
---
💰 “But How Can I Make Big Money Risking So Little?”
This is the common pushback I get:
“Shouldn’t we take big risks to get big rewards?”
Sure — high risk = high reward.
But high risk also = high chance of blowing up.
Even if you hit a few big winners, you’ve compromised your long-term survival.
That’s not trading. That’s gambling.
---
🧠 What I Actually Look For:
Low Risk / High Reward.
Yes, they’re rare.
Yes, they’re like lotto tickets.
But you don’t need to win often if you only risk a little and win big when it counts.
What’s not rare is:
Traders risking big on uncertain setups
Going all in on gut feelings
Wiping out in one or two bad trades
That’s not strategy — that’s self-destruction.
---
🧾 The 2 Core Rules of Risk:
Protect capital at all costs
Only take trades where potential reward outsizes the risk
Don’t flip the logic.
Too many traders hear “high risk = high reward” and assume high risk is required.
It’s not.
That mindset is built for Vegas, not for Wall Street.
---
🧠 If You Want to Be a Trader — Not a Gambler:
You must believe in:
Small risk, big reward
Patience
Discipline
Letting time and luck compound your edge
No other way.
🎯 If you truly get this… congrats.
You’ve crossed the line from gambling to trading.
Free Signals Based on Latest AI models💰: QuantSignals.xyz
Related publications
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
Free Signals Based on Latest AI models💰: QuantSignals.xyz
Related publications
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.