Playbook 02 · Slide 06 of 08 · Risk Management · Stops, Targets, and Sizing

Risk Framing

The profile ties risk to structure. Stops sit beyond the edge that should hold if your idea is correct. The constant across all setups: percentage of equity at risk per idea.

Stop Rule

Beyond structural level

Not round numbers

Target Rule

Next accepted zone

Respect new acceptance

Size Rule

Scale with volatility

Wider range = smaller size

Constant

% equity per idea

Attach risk to worst-case

Stop Placement

Stops sit beyond the structural edge that should hold if your thesis is correct. For VA edge rotation: beyond the VA edge being rejected. For nPOC: behind the naked POC level.

Give a small buffer beyond the structural level — not at the exact edge everyone sees. The point is not to avoid every sweep; it is to define invalidation where the thesis stops making sense.

Avoid obvious round numbers as stop locations. If your stop is at a round number by coincidence, that's fine — but don't place it there because it's round.

Target Logic

In rotation trades: first objective is POC, then the opposite VA edge if momentum carries.

In price discovery (traverse): target is the next accepted zone (HVN) on a composite profile.

If new acceptance begins to build before the target gets hit, respect it. Acceptance often turns directional moves into rotations. Don't hold for the original target if the profile is telling you the picture has changed.

Position Sizing

On days with wider ranges: widen stops proportionally and reduce size. The same % equity risk means fewer contracts when structure is far away.

On quiet days: keep stops closer and accept that some ideas will be scratched quickly for small losses.

The constant: % of equity at risk per idea. Traders who survive attach risk to their worst-case expectation, not to their best-case plan.

Core Principle: The profile helps because it ties risk to structure rather than to arbitrary dollar amounts. A stop beyond a meaningful structural level has a clear invalidation rationale. A stop at a round number or a fixed tick count has none.