Position size before the entry

The order of operations

Entry excitement is a poor risk manager. We decide size first:

• Account risk cap — a small, fixed fraction of capital per idea. If the stop is far, size shrinks. If you cannot name the stop, there is no size.
• Liquidity — can you exit without becoming the story? Illiquid names need even smaller size, or they stay on the watchlist.
• Correlation — three bank names are not three independent bets.

A classroom rule

If the planned loss on a single idea would change how you sleep, the size is too large. Reduce it until the process feels boring. Boring is a feature.

Why this note exists

Students often ask for “the stock.” The more useful question is “what happens if this idea fails on Tuesday?” Write that number down before you write the entry. Education first; no one here can promise returns.