Risk management for the modern retail investor

Position sizing, stops and the math of staying in the game.

Risk management is what separates investors who compound from those who blow up. The goal is not to avoid losses — they are inevitable — but to make sure no single loss can take you out of the game. Position sizing and stops are the core tools.

Position sizing comes first

Risk only a small, fixed percentage of your capital on any one idea. If a position would cost more than that when its stop is hit, the size is wrong — shrink it. This one habit makes the math of survival work in your favor.

Stops and asymmetry

A stop belongs where your thesis breaks, not at a round number, sized so hitting it costs only your predefined risk. Keep losers small and let winners run, and you can be wrong more often than right and still win. Remember drawdowns compound against you — a 50% loss needs a 100% gain to recover.

Key takeaways

• Risk a small fixed % of capital per idea.
• Place stops where the thesis breaks, then size to them.
• Protecting capital in bad stretches beats chasing the last gain.

This is not financial advice.