Module 1 gave you one rule: never lose more than about 1 percent of the account on a single trade. This lesson adds the course's second layer, which answers a different question: how much exposure one trade may carry.
Two different numbers
- Risk is what you lose if the stop hits.
- Allocation is how much of the account is in the trade.
A 2,500 dollar position with a stop 4 percent away risks 100 dollars. Allocation 25 percent, risk 1 percent. Both rules are satisfied at once; that is the whole trick.
The course model
- The trading account is at most 10 percent of your total portfolio. The rest sits outside the market.
- One trade may use at most 25 percent of the trading account.
- That allocation is split across at least five entries, weighted about 20 / 60 / 20 across the outer and middle levels.
Worked example: a 100,000 dollar portfolio, a 10,000 dollar trading account (the size of the paper account, which is not a coincidence), a 2,500 dollar maximum trade, five entries of 500.
In Bitcoin terms, for a reader who holds 1 BTC: 0.1 BTC in the trading account, 0.025 BTC per trade, 0.005 BTC per entry.
Where the 1 percent rule still rules
The stop. With 2,500 dollars deployed, a 1 percent risk budget of 100 dollars means the stop sits 4 percent below the average entry. If your structure needs a wider stop, the allocation must shrink. The calculator below does the arithmetic; it never lets allocation override risk.
Preparation, in the course order
- Do the analysis.
- Decide long or short from your own read, not someone else's.
- Apply the sizing above.
- Check your emotional state honestly.
- Write the plan.
- Execute the plan.
- Do not deviate from it.
Placement
Long: orders spread across the support range, most of them in the middle where fills are likeliest. Short: the mirror across the resistance range. Never put the whole 25 percent on one order.
In the lab
Mark a support range and the stop level under it. Run the calculator with your paper balance and that stop distance. The number it gives is your maximum ladder; divide it by five.