Module 5 of 6 in Technical analysis
A trading process and risk control
A repeatable chart process, observations compared with hypotheses, entry and exit plans, stop placement, risk per trade, expectancy and risk of ruin.
5 lessons in this module. Progress is saved in your browser as you go.
Most trading losses come from the process around the chart, not the chart itself: no defined exit, positions too large, and no record of results. This module builds a written process as an educational exercise, with the arithmetic of risk per trade, win rates and losing streaks.
By the end of this module you should be able to
- Write a repeatable chart-analysis process and separate observations from trading hypotheses.
- Plan entries, exits and stop levels for a hypothetical trade and state what would invalidate it.
- Calculate risk per trade, risk/reward and position size from a stop distance.
- Calculate expectancy from win rate and average win and loss, and explain risk of ruin.
Lessons in order
Module test
10 questions, chosen at random from a bank of 30 questions and balanced across this module's learning goals and difficulty levels. Every question comes with an explanation. You need 80% to pass, and you can retake it as often as you like with a fresh set of questions.
This module builds on
- Support and resistance: The checklist uses structure, support and resistance as its first steps.
- Moving averages: The checklist includes indicators such as moving averages.
- Stop-loss and stop-limit orders: Exits are often carried out with stop-loss orders, explained there.
- Average true range (ATR): Volatility-based stops use ATR, explained there.
- Probability and expected value: Expectancy is the expected value of a trade, explained there.