Module 1E
Risk basics: account size and what you are actually risking
Leads into Phase 2. Expanded later in 3D and 3E.
- Risk per trade
- The maximum dollars you will lose on one trade, decided before entry and tied to a specific stop.
- Point value
- What one point of movement is worth. One MES point is $5.
- Stop loss
- The price where you exit if you are wrong. It defines your risk.
- Target
- The price where you take profit. A 10-point MES target is $50.
- RR ratio
- Potential gain divided by potential loss. The baseline here is 1:2.5.
- Why small live, not sim
- A small live account keeps the emotional pressure real while making the dollar outcome insignificant.
Why this comes before any chart
This module comes early for one reason: survival.
Before you sit in front of a live chart with any money on the line, you need to understand that risk is not abstract. Every trade has a defined dollar amount at stake. If you do not understand this clearly before Phase 2, you will size incorrectly, hold losers too long, or freeze under pressure.
This is not the full risk curriculum. That comes in Phase 3. This is the baseline: what account size means, what risk per trade actually is, and how you calculate it before you ever place an order.
Account size reality check
Bigger is not always better when starting. A larger account amplifies bad habits. The goal of a beginner account is not to make money. It is to provide enough real psychological exposure to practise decision-making under genuine, if small, financial pressure.
Studying replays and rehearsing the process is valuable, but it cannot replicate the emotional weight of real capital, which is exactly why this curriculum puts you on a small live account rather than a simulator.
There is no sim phase. You prepare fully through Phase 3, and once you can run the complete process end to end, you begin trading a small live account. Real money, minimal size, 1 MES, roughly $20 of risk per trade.
Risk per trade
Risk per trade is the maximum dollar amount you are willing to lose on a single trade. This is decided before the trade is placed, not discovered after the stop is hit. Risk is not a vague percentage in your head. It is a specific dollar amount tied to a specific stop loss placement.
The calculation
Before you ever place a trade, you should be able to run this calculation from memory.
Risk is the only thing you control
You cannot control whether your trade wins. You can control how much you lose if it does not. This is the foundational risk principle that everything else is built on. A trader who controls risk consistently has a viable long-term process. A trader who does not is gambling.
Key takeaways
- Risk is a specific dollar amount decided before the trade, not a feeling
- Know exactly what one point is worth in the instrument you are trading
- Calculate your max loss before you place any order
- Bigger accounts do not make better traders. Better process does
Self-check
No calculator, no scrolling up
1. You are trading 1 MES with a 4-point stop. How much are you risking in dollars?
A correct answer is a single number, produced instantly. If you had to reach for a calculator, do the arithmetic until you do not.
2. Your target is 10 points on 1 MES. What is your potential gain?
Same standard. One number, immediately.
3. You took 5 trades, lost 3 and won 2. What is your net?
A correct answer works it through: three losses at $20 against two wins at $50. Note what that tells you about a 40% win rate at this ratio, because Module 3D returns to it.
4. If you moved your stop to 6 points instead of 4, how does that change your risk, and what does it do to your reward-to-risk ratio?
This is the one that matters most. A correct answer notices that widening the stop does not just increase risk, it collapses the ratio the entire model depends on. If that is not obvious yet, it will be after 3D.
If you cannot answer 1 or 2 from memory
Do not continue to Phase 2. This is the only module in the curriculum where the content is pure arithmetic, which makes it the only one where being stuck is unambiguous. Everything after this assumes these numbers are automatic.
One rep before you continue
Write it down once, on paper
"One MES point is $5. My stop is 4 points, so my risk is $20. My target is 10 points, so my reward is $50. That is 1:2.5."
That is it. Not a journal entry, not a reflection. The point is that the numbers stop being something you look up and become something you know.
What comes next
Phase 2 teaches you to read a chart with context: market conditions, structure, higher-timeframe orientation, and the locations where a trade becomes possible. None of it changes these numbers. The 4-point stop and the 10-point target stay fixed all the way through, and every setup you learn is evaluated against them.
Module 3D returns to this arithmetic and proves something that sounds wrong: at 1:2.5, you are profitable while losing most of your trades.
Log the module
You have finished Phase 1
Five modules. This is the one place I actually want to hear from you, because Phase 1 is where I find out whether the foundation lands before anyone has looked at a chart. About a minute.