No position is certain. A risk plan begins by accepting that the idea may be wrong and deciding what loss the overall account can withstand.
Separate trade risk from market movement
A 5% price move is not automatically a 5% account loss. Account impact depends on position size. If a hypothetical $10,000 account holds $1,000 of an unleveraged asset, a 5% decline equals $50, or 0.5% of the account.
Start with invalidation
Identify the price or evidence that invalidates the thesis. Then calculate position size from that distance and a predetermined maximum loss. Do not move invalidation merely to avoid admitting the idea failed.
Remember the limits
Stops can slip, markets can gap, correlations can rise, and leverage can produce losses faster than expected. Position sizing reduces risk; it does not make trading safe.
Educational content only. Examples are simplified and are not recommendations or personal financial advice.