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Module 5 · Basics

Risk management & Structure

The 1-2% rule, R:R ratio, stop loss, over-trading, paper trading, journaling, backtesting, pre-market routine, and personal trading plan.

📚 6 lessons⏱ ~35 min🎯 Final quiz
Module 5 / 683%
1
The 1-2% rule per trade
The pillar that lets you survive losing streaks
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Risk MAXIMUM 1-2% of total account capital on a single trade. On a 50K prop firm account, that's $500-1000 max per trade.

Math: at 2% risk per trade with 50% WR and RR 1:2, you can lose 10 in a row and still have 82% of your account. With 5% risk, 10 losses = 60% of account = challenge blown.

Why 1-2% and not more: losing streaks of 5-10 trades happen. With 1%, you survive. With 5%, you blow up.
2
R:R ratio (Risk:Reward)
The lever that makes your win rate workable
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R:R = (Take profit distance) / (Stop loss distance). Critical for breakeven:

  • R:R 1:1 → need 50% WR to breakeven
  • R:R 1:2 → need only 33% WR to breakeven
  • R:R 1:3 → need only 25% WR to breakeven

Tradelo recommendation: aim for R:R 1:1.5 to 1:2 minimum. Lets you have a reasonable WR (45-55%) and still be profitable.

3
Stop loss: the unbreakable rule
Never move your stop against you
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Your stop loss is calculated at the entry of the trade. It's THE one thing you NEVER change once the trade is in place.

Allowed: move stop in your direction (lock in profit). Forbidden: move stop further away to "give the trade time".

The trap: "If I move my stop a bit, price will come back". Sometimes it does, but every time you reinforce this behavior. The one time it doesn't come back, you take a -3R loss instead of -1R. Erases 3 winning trades.
4
Over-trading: the silent killer
More trades ≠ more profit
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Beginners think the more they trade, the more they earn. Wrong. The more you trade:

  • More commissions paid (kills the edge)
  • More average-quality trades (no real edge)
  • More fatigue, more mistakes

Quality > Quantity. 1-3 quality trades per day > 15 mediocre trades.

Simple rule: if you don't have a trade meeting your A+ criteria, you DON'T trade today. Boring? Yes. Profitable in the long run? Yes.
5
Trading journal & review
The free improvement tool
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For each trade, write down:

  • Date, time, instrument
  • Setup taken (which condition triggered the entry)
  • Entry, stop, target
  • Result (win/loss, P&L)
  • Emotion during the trade (calm/stress/FOMO)
  • Lesson learned (yes, even on winning trades)

Weekly review: read your past week's trades. Identify your top 3 mistakes. Plan corrections for next week.

It's tedious. It's the most powerful tool to progress, free.

6
Pre-market routine
5 minutes that change your day
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Before opening any chart in the morning:

  1. Re-read your 5 non-negotiable rules (see Module 4 lesson 4)
  2. Check the day's economic calendar (FOMC? NFP? CPI? Avoid these days at first)
  3. Look at the previous day's chart: trend, range, key levels
  4. Mentally state: "Today I take only my A+ setups. Otherwise I don't trade."
  5. Define your daily max loss limit and write it down

5 minutes. Total. Transforms your discipline.

Module quiz

3 questions to validate your knowledge.

1 Maximum recommended risk per trade?
2 R:R 1:2 — what's the breakeven WR?
3 Can you move your stop AGAINST you?
0/3
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