Education · Understand your trades
Position sizing & max-loss
New traders obsess over being right. Experienced traders obsess over how much they risk when they are wrong. Position sizing — deciding how big a trade is relative to your account — matters more than any single prediction. It is the difference between a losing streak that stings and one that ends you. This is reason R2 (no risk management) and R3 (overleverage), and it is something YOLO does for you.
Why size beats being right
Imagine two traders with the same £5,000 account and the same winning idea that returns +50%.
- Trader A risks 2% (£100) per trade. A run of five losses costs £500 — uncomfortable, but they keep trading.
- Trader B risks 40% (£2,000) per trade chasing a fast win. One loss and the account is crippled; the great idea that follows can never make it back.
Both had the same edge. Only one survived long enough to use it. Good sizing is what keeps you in the game while your edge plays out.
The arithmetic of survival
Losses hurt more than equal-sized gains help, because you are recovering from a smaller base. This is why keeping each loss small is non-negotiable.
| Drawdown | Gain needed to recover |
|---|---|
| −10% | +11% |
| −25% | +33% |
| −50% | +100% |
| −75% | +300% |
A common professional rule is to risk only 1–2% of your account per trade. On £5,000 that is a maximum loss of £50–£100 per position. It feels slow — and it is exactly how people survive the losing streaks that wipe out oversized accounts.
Capital-at-risk: the number that matters
With a defined-risk options strategy, your capital at risk is simply the maximum loss of the position — the most the trade can ever cost you. Because that number is known up front (see defined risk), you can size precisely: choose how many contracts so that the strategy’s total max-loss stays within your per-trade budget.
Example: if your rule is “risk no more than £100” and one contract of a spread has a £40 max loss, you can hold at most two (£80). A third would breach your own limit — so you do not take it.
How YOLO sizes a trade for you
You set your risk profile once — conservative, moderate or aggressive, plus a time horizon. From then on, YOLO’s strategy engine uses that profile to size positions to a chosen percentage of your capital and to filter which strategy types you are even shown. A conservative profile sees smaller, tighter, higher-probability structures; an aggressive one allows more. Either way, every candidate states its maximum loss in plain English before you confirm — so the sizing decision is never hidden from you.
Sizing controls how much you risk per trade; it cannot stop a trade from losing or guarantee any outcome. A capped max-loss can still be lost in full, and losses can repeat. Never trade with money you cannot afford to lose. See the full Risk Disclosure.
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