Execution & Risk

Imagine a sniper. He calculates the wind, the distance, the target's movement, the humidity, and the Coriolis effect perfectly (Analysis). He's done everything right on paper. But when he pulls the trigger, his hand shakes (Execution). He misses. All that perfect analysis was worthless because execution failed.

In trading, "shaking your hand" takes many forms: entering too late because you hesitated, ignoring the spread cost and getting filled at a worse price than expected, sizing your position too large and panicking when it moves against you, or using a Market order during news and getting slipped 20 pips.

You can have the best strategy in the world—one that wins 60% of the time with a 2:1 reward ratio—and still lose money if your execution is poor. Conversely, a mediocre strategy executed with discipline and proper risk management will outperform a brilliant strategy executed poorly. This is the execution paradox that kills most traders.

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1. The Cost of Entry (Spread & Slippage)

Every time you click "Buy," you start with a loss. This is unavoidable, but it must be managed.

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2. Position Sizing (The Holy Grail of Trading)

This is the only true "secret" in trading. You can have a win rate of just 40% and still become a millionaire if your position sizing is correct. Conversely, you can have a 70% win rate and still go broke if you size positions poorly.

The 1% Rule: Never risk more than 1% of your account on a single trade. Period. No exceptions. This single rule has saved more trading careers than any indicator, strategy, or guru advice combined.

How does it work? If you have a $10,000 account, your maximum risk per trade is $100. If your stop loss is 20 pips away, you size your position so that 20 pips equals $100. If your stop loss is 50 pips away, you size smaller so that 50 pips still equals $100. The distance to your stop determines your position size—not the other way around.

Losing streaks are inevitable—every strategy has them. The question is whether you'll survive yours with enough capital and emotional stability to continue. The 1% Rule ensures the answer is yes.

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3. Leverage is NOT Risk

Beginners confuse Leverage with Risk. They are different.

• Leverage is a tool to reduce the margin requirement (how much cash you need to open a trade).
• Risk is determined by your Position Size (Lot size).

You can trade with 1:500 leverage safely if your position size is small ($1 per point). You can blow up an account with 1:1 leverage if you put 100% of your money into a single stock that goes to zero.

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Conclusion of Part 1

You have now completed your tour of the financial markets supermarket. You understand the aisles (Stocks, Forex, Crypto, Indices), the products on the shelves (CFDs, Futures, Options, Perpetuals), the infrastructure (Exchanges, Prop Firms), and the checkout counter mechanics (Execution, Spreads, Slippage).

This foundation is crucial. Most beginners jump straight into charts and indicators without understanding what they're actually trading, how the instruments work, or why execution matters. They're trying to drive a race car without understanding how the engine works. You now have that mechanical knowledge.

The next step is to learn How to Read the Price. Technical analysis—the art of reading charts, identifying trends, finding support and resistance, and timing entries—is where strategy begins to form. It's time to leave the theory of markets and enter the practical world of charts.