Risk control is more important than choosing winners

So how do you give a position in your wallet? Let’s use $ NVDA (Nvidia Corporation (Nasdaq :)) As an example, with a Investment account of $ 100,000 and principles of risk control with a price of the shares of $ 174.18 By action using a 1% risk per operation structure:

As an investor, you must adjust your risk profile to your own specifications; This example only gives you the frame to do it. This example runs the risk of $ 1,000, or 1% of the account, while putting approximately $ 12,370 to work in NVDA. However, the most critical point is that the loss arrest level must be maintained.

This structure ensures that losses remain manageable, aligning with solid risk management practices. However, the greatest error of most investors is not to sell when Stop -los is activated.

A rule only works if it follows strictly.

Loss limits and general risk management

As noted, the reduction of losses and the honor of loss detention levels are not negotiable as a merchant. You cannot argue with the market; You can only decide how much pain you will have.

For example, Steve Cohen merchants survive because they cut the losers quickly. Bill O’Neil used a loss of 7% to 8%. Warren Buffett said: “Rule #1: Don’t lose money. Rule #2: Don’t forget Rule #1”. Millennium Management imposes strict loss limits per merchant. Break the limit, lose your capital allocation. That policy helped them accumulate profits of $ 56 billion while keeping volatility low.

Those are not empty slogans. They are the rules for which they live.

Use the Stop-Losses in each trade. The most important thing, its stop-loss must be predefined and sacred before making the initial trade. In addition, once the trade is implemented, the stop never moves further, which only expands its loss.

If you are not sure how to apply the detention losses in your position, use a simple mobile average, such as the simple mobile (DMA) such as 50, 100 or 200 days. These averages provide easy and visible detention that fits as the price of your possession increases. The table below shows the 50, 100 and 200-DMA and the percentage loss for each level. What mobile average use depends on you; However, make sure you fit your realistic “Loss tolerances”.

There are other things you can do to add more levels of protection:

• Stress test your wallet.

• Execute simulations for interest rates, geopolitical events or liquidity locks.

• Assume the worst. Ask what you will do if it happens.

• Keep effective by hand. Liquidity gives them power when others are forced to sell.

• Coverage when asymmetries appear.

The crucial conclusion is to use all the tools available for portfolio risk management, whether they are detained, stress tests, rebalancing, hedges or liquidity shock absorbers.

Place them. These are your lines of life.

Portfolio risk management in relation to the market

Portfolio risk management does not live in a vacuum. You must administer it in relation to the broader market.

To do that, you must use volatility as a key input. The Vix sat in range 15 to 18 in July 2025. That is low. But Low does not mean safe. Low volatility often points to complacency. When the volatility is cheap, it is worth buying insurance.

In the same way, investors must separate the perceived risk of real risk. Volatility may seem danger, but it is often a price movement around a trend. The real risk lies in the loss of permanent capital, the over -concentration or misalignment with the temporal horizon and the objectives.

As we discussed previously, volatility engenders volatility. Low volatility periods always lead to high volatility, as now. However, the opposite is also true. The trick is to navigate for the high volatility periods well enough to participate in the prolonged periods of low volatility. Ray Dalio, founder of Bridgewater Associates, advocates a risk -like analytical approach:

“If you are not worried, you should worry. And if you are worried, you don’t need to worry.”

In other words, constant surveillance and preparation are more productive than panic. Investing during periods of uncertainty can be dangerous; However, there are some steps to follow by investing in uncertain markets.

In addition, Watch Market -teals. Currently, the market is reaching new maximums with weak amplitude, while margin debt is increasing abruptly. These are red flags that are worth paying attention, and suggest a market fragility level.

Correlation is another tool. When the assets move together, the risk increases. Monitor this. If everything you have begins to trade the same, reduce the risk.

The most critical, ask yourself:

“Is my portfolio positioned for how the market behaves now? Instead of how I should behave? “

That humility protects its capital.

Gathering everything

You will be wrong often. Portfolio risk management converts that weakness into a strength, which gives it power of permanence in the game. In our previous discussion of “Invest as spock “ We notice:

“Emotionally react to short -term movements often destroys long -term returns. Spock’s force was never its speed, but its stability.

“Logic is the beginning of wisdom, not the end.”

The ability to step back, clearly reassess and follow a predetermined investment process keeps wallets aligned with the objectives.

Discipline and patience are a strategic advantage in portfolio risk management.

Here are ten rules of professionals who have dominated the game:

1. Limit the risk per operation to 1–2 percent. Small losses retain capital. That keeps you in the game.
2. Use the stop blankets consistently. Bill O’Neil used 7–8 percent of stops. Buffett insisted not losing. Cut the losers quickly.
3. Diversify in all strategies and markets. Michael Dever used risk parity in strategy -marked cells. That avoids domain.
4. Use firm style stop limits. Millennium applies strict limits by desktop, by merchant. Violations trigger capital elimination. That enforces discipline.
5. Adjust the dimensioning by volatility regime. Trends followers are reduced in turbulence, reduce in constant tendencies. If it adapts to the state of the market.
6. Coverage asymmetries. Use options to protect from disadvantage while keeping up. Goldman recommends putting propagations when asymmetry increases.
7. Develop crisis shock absorbers. Keep effective for opportunities and stress. Stage stress tests generate resilience.
8. Use commercial magazines and refine habits. Successful merchants register each trade. Knowing your trends avoids repeated errors.
9. Train the awareness of mental risk. Susquehanna uses poker to build a probabilistic thought under uncertainty. That sharpens emotional control.
10. Commit to your rules. Wyckoff insisted on the placement of stops in each trade. Discipline exceeds conjectures.

Your system must be written, reviewed and lived by. Any adjustment must come from the data, instead of emotions.

In the end, discipline always wins. Portfolio risk management is not exciting, but that is why some investors survive while others disappear.