2019issue C0742-44
A structure-based stop, then resize or pass
This archive workflow places a protective exit beyond a chart extreme, then cuts position size until the cash at that line fits the account. If the remaining cash risk still fails to match the planned reward, the trade is left untaken. A stop chosen only to keep the cash loss small is treated as an imagined rule rather than a reading of the price pattern.
- Place the protective exit beyond a chart extreme so ordinary movement against the entry has room before the position is closed.
- A stop chosen mainly to keep the cash loss as small as possible is treated as an imagined rule, and is described as producing early exits, leftover small losses, and repeated false stop-outs.
- If the structure-based stop implies more cash risk than the account can accept, reduce size so each price increment costs less instead of moving the stop closer to entry.
- If the cash at risk to that stop still fails to fit the planned reward after size is adjusted, leave the trade untaken.
Stop location and cash-loss size stay separate
The archive treats stop location and cash-loss size as separate decisions. The price pattern sets the exit. Position size sets how much that distance can cost.
The protective exit is placed beyond a chart extreme so ordinary movement against the entry has room before the position is closed. That stop-loss marks when the setup is no longer valid. It is not taken from a preferred cash-loss amount.
The cash-first stop as an imagined rule
A stop chosen mainly to keep the cash loss as small as possible is treated as an imagined rule rather than a reading of the price pattern.
Stops set that way are described as producing early exits, leftover small losses, and repeated false stop-outs.
Resize to the structure, or pass
If the structure-based stop implies more cash risk than the account can accept, size is reduced so each price increment costs less instead of moving the stop closer to entry. Volatility position sizing holds less so the cash loss at a distant, structure-based stop stays inside the account limit.
Risk-reward is checked before entry. Cash at risk to the structure-based stop is compared with the planned target. If that comparison still fails after size is changed, the trade is left untaken.
Room for a retracement inside the stop
In the worked short example, a temporary retracement that stayed inside the structure-based stop left the trade open so price could continue toward the planned target.
All readings on this track · 25 readings
- 1988Two-sided optimization for volatility-scaled breakout rules
- 1990Weekly range volatility as a tactical regime filter
- 1993Heat first, then contract count on a weekly close-only breakout
- 1994Shared sigma for trend entries, retests and stops
- 1995The promised result as one testable trading procedure
- 2001Convert a survival ceiling into a volatility filter
- 2002Bound the next loss before the bear trade
- 2004Dollar-loss tolerance versus percent-of-equity stops
- 2004Bounded risk before entry: stop, size, and leverage
- 2006Position sizing as the pre-trade bound on loss and exposure
- 2006A trend-regime matrix for volatility position sizing
- 2011A premarket range checklist for opening-hour breakouts
- 2011Stop-defined share count on a clustered intraday short
- 2012Mechanical system design with strategy, signals, and size
- 2012Precommit size before a one-day policy shock
- 2013R-multiple expectancy, drawdown, and volatility position sizing
- 2014Constructing trend-aware slope-divergence rules
- 2014Pretrade drawdown fences and volatility sizing
- 2015Convert pip value into cash before a forex lot size is chosen
- 2016Expectancy as an execution skill rather than a backtest score
- 2017Volatility parity equalizes the ticket; implied volatility is a regime dial
- 2018Wide-range breakout rules from chart volatility
- 2019A structure-based stop, then resize or pass
- 2020A cash rule that zeros a trend book on extreme volatility and a short losing window
- 2025R-multiples before you size up