Trading Risk Cheat Sheet

by MarginLab — marginlab.lemonsqueezy.com

Position Sizing Formula

Shares = (Account × Risk%) / |Entry − Stop|

Example: $10,000 account, 2% risk

Entry: $100, Stop Loss: $95

= ($10,000 × 0.02) / $5 = 40 shares

Position value: $4,000 (40% of account)

The 1-2% Rule

Never risk more than 1-2% of your total account on any single trade. This is the #1 rule professional traders follow.

Risk/Trade	10 Losses	20 Losses
1%	-9.6%	-18.2%
2%	-18.3%	-33.2%
5%	-40.1%	-64.2%
10%	-65.1%	-87.8%

Risk/Reward Ratio

R:R = |Target − Entry| / |Entry − Stop|

Minimum: Only take trades with 1:2 R:R or better

At 1:2 R:R → breakeven at 33% win rate

At 1:3 R:R → breakeven at 25% win rate

Higher R:R = you can be wrong more often and still profit

The Correlation Rule

5 tech stocks ≠ 5 positions. They are one concentrated bet on tech.

Check before adding:

Is this correlated with existing positions?
Would a sector crash hit multiple positions?
What is my total sector exposure?

Max 5-6% total portfolio risk across all open trades

Pre-Trade Checklist — Complete Before Every Trade

Thesis written down (why this trade?)Trend direction confirmed on higher timeframeEntry price defined (limit / stop / market)Stop loss set BEFORE entry (invalidation level)Target price defined (technical level, not hope)Position sized to 1-2% account riskRisk/Reward is 1:2 or betterNot correlated with existing positionsNo major catalyst / earnings within holding periodI am calm and following my system, not emotions

Free calculators: www.margin-lab.com/tools | Full toolkit: www.margin-lab.com/store

Press Ctrl+P (or Cmd+P) and select "Save as PDF" to download.

Try the Free Calculators|Browse the Full Toolkit