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Topic
Risk management
15 guides in Finabase Learn
- Common trading mistakes and the math behind them Overtrading, averaging down, trading without stops, oversizing, revenge trading and ignoring costs: what each mistake costs, worked through with numbers.
- Limitations of technical analysis: what the research really shows Efficient markets, data snooping and the published evidence on technical trading rules, a 1,000-random-rule experiment on SPY, and where charts genuinely help.
- Margin of safety: Benjamin Graham’s rule for valuation errors What a margin of safety is, how to calculate one, why valuations are ranges rather than points, and how DCF sensitivity and position sizing feed into it.
- Position size How many shares or contracts a trade uses, usually set so that a loss at the stop costs only a fixed slice of the account.
- Position sizing: how many shares to buy for a set risk How fixed-fractional position sizing turns a risk budget and a stop distance into a share count, with worked examples, ATR-based sizing and the common traps.
- Rebalancing Trading a portfolio back to its target mix after market moves have pushed the weights of stocks, bonds or other assets off target.
- Risk-reward ratio The distance from entry to stop compared with the distance from entry to target, used to judge whether a trade is worth taking.
- Risk-reward ratio and R multiples: the math of a trade What the risk-reward ratio and R multiples measure, the break-even win rate for any ratio, and how to compute expectancy from a win rate, wins and losses.
- Stop-loss order A standing order to sell (or buy back a short) once the price reaches a set level, used to cap the loss on a position without watching the screen.
- Stop-loss placement: volatility, structure and time stops Where traders place stop-losses (ATR multiples, chart structure, percentages, time) and why a stop order never guarantees its price, shown on a real AAPL gap.
- Take-profit order A limit order placed at a target price to close a winning position automatically, often paired with a stop-loss in a bracket order.
- Trading plan and trading journal: what to write down What a written trading plan contains, which fields a trading journal should record, and how to review results with win rate, average R, profit factor and drawdown.
- Trailing stop A stop order whose trigger price follows a rising stock by a set dollar amount or percentage, locking in gains while staying in the trend.
- Trailing stop orders: percent vs dollar trails, with real examples How a trailing stop ratchets with the price, how percent and dollar trails differ, a step-by-step worked path, and 10% vs 15% trails tested on Tesla in 2026.
- Volatility and the VIX: historical vs implied volatility explained How historical and implied volatility differ, what the Cboe VIX measures and how it is built, what its 1990–2026 history shows, and why VIX products behave differently.
Educational content, not investment advice. Finabase Learn explains how markets and tools work. It does not recommend any security or strategy, and examples are for illustration only. Investing involves risk, including the loss of principal. Rules and figures are for the United States unless stated and can change — check the cited source before you act.