Episode 32 — Applied Stock Basics: Risk Limits & Position Sizing
Episode 32 — Applied Stock Basics: Risk Limits & Position Sizing “Lock the Numbers” so One Mistake Can’t Break the Whole Account 3-Line Summary Long-term results often depend less on prediction and more on whether you set hard loss ceilings first —that’s where stability comes from. This episode converts your Episode 31 Constitution into five risk-budget numbers plus position sizing rules that prevent oversized mistakes. The core idea is simple: small losses per decision, big consistency over time —that’s how accounts survive and compound. Table of Contents The goal of Episode 32: why “numbers” stabilize behavior The 3-layer risk limit model: Account–Monthly–Per Decision The Five Risk-Budget Numbers: turning the Constitution into enforceable rules Position sizing fundamentals: “how much you buy” drives most outcomes Three sizing methods (simple): fixed allocation, fixed loss, volatility-aware sizing S&P 500 single-core sizing: design it as accumulation, not trading...