Risk management basics

The exit line sets the risk. You set the budget.

This page explains how Vektor's sizing works and the habits that keep a rules-based system survivable. It is educational, not financial advice — every trading decision, and its risk, is yours.

How sizing works

Size = risk budget ÷ distance to the line.

The mechanic #

You set one number in the settings: risk per trade, as a percentage of equity. On each entry, Vektor divides that budget by the distance between the entry price and the exit line, and that quotient is the position size. Wide trail (volatile market) → smaller position; tight trail (calm market) → larger one. A stop-out therefore costs about the same fraction of your account every time — that's the whole point.

The cap #

A separate exposure ceiling caps the position regardless of what the risk math asks for, so a very tight trail can never quietly turn into an enormous bet. It is a ceiling, not a target.

What sizing cannot do #

The math assumes you exit at the line. Gaps, news wicks, and outages can fill you beyond it, and the tester does not simulate liquidation or funding costs. Position sizing bounds normal outcomes; it does not bound the worst ones. See limitations.

Think in R

One unit for every trade.

R — the amount at risk between entry and the initial exit line — is defined on the reading the signal page. Here is why it matters for risk.

It makes losses expected, not alarming #

A losing trade is −1R, by construction. If your risk per trade is 2% of equity, a loss is 2% — known before entry, identical in every market condition. When a loss can't surprise you in size, it is far easier to let the rules keep running.

It makes streaks survivable arithmetic #

Trend systems lose more often than they win, so losing streaks are certain — five in a row will happen. In R, a five-loss streak at 2% risk is roughly −10% of equity: unpleasant, survivable, and recoverable by one good trend. The same streak at 10% risk is close to −40%. Same system, same signals — the budget decides which experience you have.

It scales both ways #

Raising risk per trade scales returns and drawdowns together — there is no setting where you get one without the other. Whatever budget you choose, choose it for the losing streak, not the winning one.

Practical basics

Boring rules. They work anyway.

Only trade money you can lose

Capital you may need for rent, bills, or an emergency does not belong behind any trading system. No exceptions, including this one.

Pick a drawdown you can survive first

Decide the worst equity dip you could actually sit through without abandoning the system, then work backwards to a risk-per-trade setting whose backtested drawdown fits inside it — with margin, because live is usually worse than the test.

Keep the budget constant

Raising risk after wins and cutting it after losses turns a positive-expectancy system into a mood. The percentage sizing already compounds for you — let it.

Be careful with leverage

Leverage multiplies the drawdown as faithfully as the return, and it adds failure modes the tester does not model — margin calls, liquidation, financing costs. If you use it at all, earn it slowly.

+None of this is financial advice. It is how disciplined system traders think, offered so you can decide for yourself.

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