Risk of Ruin: The Math That Decides Whether You Survive
A profitable trader and a blown-up account can run the same strategy. Risk of ruin is the math that decides which one you become, computed from first principles.
Otrai
Online Trading, Clarified
#Risk Management
8 articles
Correlation and Diversification: Why 10 Tech Stocks Aren't a Diversified Portfolio
Diversification is not about how many positions you hold — it is about how differently they behave. Ten tech stocks that move together are one big bet, not ten independent ones. Here is what correlation actually measures and why it decides your real risk.
How to Keep a Trading Journal: What to Track and Why Most Quit
Most traders who start a trading journal quit within a week. Not because journaling is complicated, but because it is tedious and the payoff is invisible for a long time.
Short Selling Explained: Borrowing, Costs, and Why Squeezes Happen
Short selling means borrowing shares, selling them, and buying them back later. Here's the mechanic, the borrow fees, and the asymmetric risk profile that makes it fundamentally riskier than owning stock.
Covered Calls, Protective Puts, and Cash-Secured Puts Explained
Covered calls, protective puts, and cash-secured puts are not free money. Each trades away something specific in exchange for income, a loss floor, or a paid limit order.
Risk-Reward Ratios: How to Set Targets That Make Your Strategy Profitable
A risk-reward ratio compares how much you stand to lose on a trade to how much you stand to gain. It is arguably the most important number in your trading plan, because it determines whether your strategy can survive a normal losing streak.
How Leverage and Margin Actually Work: Calculations, Risks, and Margin Calls
Leverage lets you control a larger position than your account balance would normally allow. A $10,000 account with 10:1 leverage can open a $100,000 position. That sounds powerful, and it is — in both directions.
Position Sizing: The 1% Rule and How to Calculate Risk Per Trade
Most traders obsess over entries and exits. The ones who survive obsess over how much they risk per trade. Position sizing is the single most important skill in risk management, and the 1% rule is where it starts.