Learning centreLesson 03 of 8
Intermediate
12 min readEducationalRisk management
Fixed-fractional sizing, stop placement and why survival compounds.
Risk per trade
Decide the maximum percentage of equity you will lose if you are wrong, then derive size from the distance to your stop.
Drawdown math
A 50% loss requires a 100% gain to recover. Avoiding deep drawdowns is worth more than catching every move.
Correlation risk
Five tech positions are close to one position sized five times larger.
Knowledge check
Answer to reveal the explanation
1. You risk 1% of a $25,000 account with a stop 4% away. Roughly what position value is that?
0 of 1 correct
Key takeaways
- Size from the stop, not from conviction.
- Drawdowns are asymmetric.
- Correlated bets stack risk silently.
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