← Futures · lesson 12 of 12
By the end of this one you'll know what a stop loss does, what position size means, what traders mean by R, and how those three together decide the size of a worst day.
These three words are all about deciding the worst case while you're calm, instead of discovering it while you're panicking. A stop loss is a standing order that automatically closes a trade if the price touches a line picked ahead of time, and it's a fence: you build it before you turn the horses out, never while they're already running. Position size is simply how much money rides on one single trade, and it's how many animals go in one paddock, because nobody who's been burned puts the whole herd behind one gate. R is trader shorthand for one unit of risk, the dollar amount a person decided one trade is allowed to lose, so if someone risks $5 and makes $10, they made 2R. Measuring in R is like scooping feed instead of eyeballing it, every trade risks one scoop, so good days and bad days can actually be compared. Put together, the fence, the paddock, and the scoop are how people try to keep a bad day boring instead of ruinous, and boring bad days are how people last long enough to learn anything.
Same lesson, told by a hundred dollar bill. Tap to walk it one step at a time.
In this example, a trader with $100 decides one R is $5.
They buy 10 units at $10 with a stop loss at $9.
50, so the plan risks 50 cents times 10 units, about $5, one R, though in a fast market a stop can fill a touch worse than its line, so it's a plan, not a promise.
The price drops, the stop closes it, and they still hold about $95, and if instead it had risen to $11, closing there makes $10, which is 2R.
Even ten straight losses at about one R leaves roughly half the account standing, and that's the entire point of the scoop.
You're at the county fair gate with two kids bouncing like popcorn, and last year this place quietly ate $180 you didn't plan on spending. Wristbands, midway games, funnel cakes, the whole gauntlet. You've got about ninety seconds to decide how today works.
Pick your move. Then peek at the other roads if you're curious.
A stop loss, position size, and R are all one idea wearing three names, decide your worst day while you're calm, so no single bad hour can reach the money that matters.