A rules-first approach to trading: the stop is set before the entry, risk is capped at 1.5% per trade, and winners are allowed to run behind an ATR trailing stop.
The approach
The edge isn’t a secret indicator — it’s keeping losses small and fixed while giving winners room to become large.
Every trade starts with the invalidation level. If we can’t say where the idea is wrong, there is no trade. The stop order goes in with the entry — never later.
Invalidation → stop distancePosition size is calculated from the stop distance so that a full loss costs no more than 1.5% of account equity. Ten losses in a row is a drawdown, not a disaster.
Size = (Equity × 1.5%) ÷ (Entry − Stop)No fixed target caps the upside. An Average True Range trailing stop follows price, adapts to volatility and only ever tightens — locking in more of the move as the trend extends.
Trail = max(prev, Close − k × ATR)Backtest report
Hypothetical results from a rules-based backtest on USOIL using stop-first entries, 1.5% maximum risk and an ATR trailing exit.
Over the test period
Peak to trough
Gross profit ÷ gross loss
Winning trades
Sample size
Losing more often than winning is normal for a trend-following exit. With losses capped and winners trailed, a profit factor of 2.03 at a 44% win rate implies the average winner was roughly 2.6× the size of the average loser.
Return ÷ max DD
5.8×
Implied win/loss size
≈ 2.6 : 1
Hypothetical performance. These figures come from a backtest, not live trading. Backtested results have inherent limitations: they are prepared with the benefit of hindsight, may not reflect slippage, commissions, spreads, swaps or liquidity, and do not represent actual trading. Past and simulated performance is not indicative of future results.
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Learn
Short, practical articles on risk, execution and reading results honestly.
A trade without a predefined stop is an open-ended liability. Here is how to place the stop before you ever think about the target.
Read articleCapping risk at 1.5% of equity per trade keeps a losing streak survivable. The maths, and a worked example.
Read articleAn Average True Range trail moves with volatility, ratchets in your favour, and never moves backwards. How it works.
Read articleNet return is the least useful headline number. Drawdown, profit factor, win rate and sample size tell the real story.
Read articleStay in the loop
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Backtested and hypothetical performance results have inherent limitations. They are prepared with the benefit of hindsight, do not involve real money, and may not account for slippage, spreads, commissions, swaps, liquidity or the psychological impact of live trading. No representation is made that any account will or is likely to achieve results similar to those shown.
Past performance, whether actual or simulated, is not indicative of future results. A stop-loss order does not guarantee that a position will be closed at the stop price; in fast markets or across gaps, losses may exceed the intended risk per trade.
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