Risk per trade

Shows what your risk percentage is worth in cash, and what a losing streak does to the account. Use it when choosing how much to risk.

A percentage is easy to agree to and hard to feel. One percent of capital sounds modest until it is stated as cash on a particular account on a particular day. This card puts the number in front of you in the currency you actually think in, so the decision is made with the real figure rather than an abstraction.

R value is the same number wearing a different name. Traders often describe results in R, where one R is the amount risked on the trade. A trade that made three times what it risked is a three R win. Thinking in R is useful because it makes results comparable across instruments and account sizes, and it stops a large cash win on an oversized position from looking like skill.

The losing streak rows are the part worth sitting with. If you risk a fixed percentage, each loss shrinks the account, so the next loss is smaller in cash terms. That is the built in brake on percentage sizing and it is why the account curve bends rather than running to zero in a straight line. Five losses at two percent do not cost ten percent. They cost a little less, and the difference grows the longer the streak runs.

Streaks are more common than intuition suggests. A strategy that wins half its trades will produce a run of five losses fairly regularly over a few hundred trades. The question this card answers is not whether such a run will happen but whether the drawdown it produces is one you would keep trading through. If the capital after the streak is a number that would make you abandon the plan, the risk per trade is too high, whatever the expectancy says.

If a daily loss allowance is set on the Staircase, the risk figure here is capped by it and the fine print says so. That cap is deliberate. It stops a single position from consuming a limit that was meant to cover a whole day of trading.