Risk before entry
The stop sets the size. Never the other way round.
Size any position from its stop instead of from a feeling. Read the stop distance off the chart, turn a fixed risk per trade into a position size with one division, and quote every result in R — the unit that makes a gold trade, an index trade and a currency trade comparable on one record. Covers lots, pips and point value, why a stop belongs beyond a level and never on it, why leverage changes margin but not risk, and why a 1:3 risk-reward ratio can still produce the worse record.
5 chapters · 6 quiz questions · 16 terms · included with a plan
Otus, on this module
Entries get all the attention and decide the least. Two traders can take the identical trade and one of them is finished by Friday. The difference is not nerve and not talent — it is one division, done before the order. It takes less time to learn than one oversized loss takes to recover from.
The chapters
Each module ends with you doing what it taught — a written answer Otus reads, and a quiz.
- 01 · Read
Stop first, size second
Same trade, same stop: one account gives back under half a percent, the other more than ten.
- 02 · Read
R: the unit every trade is counted in
One unit that makes a gold trade, an index trade and a currency trade comparable.
- 03 · Read
A stop goes beyond the level, not on it
What a stop is for decides where it belongs.
- 04 · Study
Find it in this week's study
Open "Which direction paid at a level" and read the four rows as one sentence.
- 05 · Write
In your own words
Three sentences. Otus reads them.
- 06 · Quiz
Six questions on sizing from the stop
A wrong answer still pays. It costs the combo, not the XP.
16 terms this module defines
The same definitions Otus uses in the lessons. All of them are in the trading glossary.
- Stop distance
- The gap between the entry price and the stop, measured in the instrument's own unit — points, ticks or pips. Read off the chart before anything about money is decided.
- R
- The money lost if the stop is reached: one trade's worth of being wrong. Every other number in the trade — target, result, slippage — is quoted as a multiple of it.
- R-multiple
- A result expressed in R: +2R made twice what was risked, −1R lost exactly the planned amount. It makes trades in different instruments and account sizes directly comparable.
- Risk budget
- The fixed amount of money one trade is allowed to cost, chosen in advance. It does not grow because a setup looks better than usual, and it does not shrink because the stop is wider.
- Risk per trade
- The risk budget expressed as a percentage of the account — for example 0.5% or 1%. On a 10,000 account, 1% risk per trade means one R is 100.
- Position size
- The number of units, lots or contracts in a trade: risk budget ÷ (stop distance × point value). An output of two decisions already made, never a starting point.
- Invalidation
- The price at which the reason for a trade stops being true — usually a piece of structure breaking. The stop sits just beyond it.
- Point value
- What a one-point move is worth for one lot or contract of an instrument. It is the bridge between a stop distance on the chart and a loss in money.
- Pip
- The standard unit of price movement in currency pairs — usually the fourth decimal place (0.0001), or the second (0.01) for yen pairs. Indices and metals are more often measured in points or ticks.
- Lot
- A standardised trade size. In currency pairs a standard lot is 100,000 units of the base currency, a mini lot 10,000 and a micro lot 1,000; other instruments define a lot in their own contract terms.
- Risk-reward ratio
- The distance to the stop compared with the distance to the target, written 1:2 or "2R". A measurement of two distances — it says nothing about how often either is reached.
- Drawdown
- How far an account has fallen from its highest point, usually as a percentage. Recovery is asymmetric: a 20% drawdown needs a 25% gain to repair, a 50% drawdown needs 100%.
- Leverage
- Borrowed exposure: control of a position larger than the cash put up for it, such as 1:30. It lowers the margin required; it does not change what the stop costs.
- Margin
- The deposit a broker holds while a leveraged position is open. It is collateral, not the amount at risk — the loss at the stop is set by distance, point value and size.
- Beyond, not on
- A stop placed outside a level's own noise rather than inside it, so that reaching it means the idea was refuted — not that price merely brushed the level it was built on.
- The controllable input
- Position size. The market sets the fill, whether the stop is reached and how far a move runs; the number of units is the one part of a trade nobody else has a vote in.
Finishing it pays 150 XP and 3 keys on the game board, on top of what each chapter earns. XP measures what you learned — never what you earned. How levels work.
Education only. Nothing here is a recommendation to buy or sell anything; the school teaches reading charts, never predictions.
Start with lesson one.
The first modules, Otus as your tutor and the game board are free. No card needed.