Risk Management

A 20% loss needs a 25% gain to break even. A 50% loss needs 100%. An 80% loss needs 400%. Avoiding catastrophic losses matters far more than maximising winners — the math is asymmetric.

Allocate based on what you can lose without changing your decisions, not what you hope to make. A position so big that a drawdown forces you to sell at the worst moment is a position that was always too big.

Diversification reduces single-asset risk but doesn't eliminate market risk. Real diversification comes from holding things that respond differently to the same conditions — not just multiple flavors of the same trade.

Before you enter a position, decide three things: maximum size, the price level that invalidates your thesis, and what you'll do when you reach it. Decisions made in calm are vastly better than decisions made in panic.