Chapter 12 Assignment
Exercise 1 - The Basics
1. If you lose 30% of your portfolio what percentage gain do you need to get back to break even?
2. What are the 3 types of stop losses mentioned in this chapter and how do each of them work?
3. Why do we need a stop loss?
4. What are the advantages and disadvantages of setting risk per trade at 3.5%?
5. What are the advantages and disadvantages of setting risk per trade at 1.5%?
6. What are the disadvantages of invalidation-based stop losses?
7. At a 1:3 risk-reward ratio, what’s the minimum viable win rate?
8. Calculate your position size given you have a portfolio size of $5000, risk per trade at 2.5% and
distance from stop loss to trade is 5.4%.
9. For each chart below to calculate or find
a. Risk reward ratio
b. Minimum winrate
c. Percentage distance of stop loss from entry
d. Position size
i. Given a portfolio size of $500 and risk per trade of 2%
ii. Given a portfolio size of $1000 and risk per trade of 5%
iii. Given a portfolio size of $4500 and risk per trade of 3%
Exercise 2 - Test Yourself
Use the information below to test out your strategy and keep track of your winrate.
Here’s recommended risk management plan:
● Risk Per Trade: 2%-3%
● Stop Loss Method: Invalidation Based on TA
● Minimum Risk to Reward Ratio: 1:2
● Win Rate Assumption: 40% (After you’ve taken your first 20 trades, update this assumption and
adapt your minimum R:R. This is higher than the minimum to account for fees, slippage and also
makes your risk of ruin 0%)
Now if you want to create your own make sure to fill out all of the below.
● Portfolio Size:
● Stop Loss Method:
● Risk Per Trade (%)
● Risk Per Trade ($)
● Minimum R:R:
● Win Rate:
