ENTRY  N° 52  /  80
Glossary

Notional versus risk

Part of the theme Risk and position sizing.

Definition

Notional is the full market value of a position, while risk is only the amount lost if the stop is hit; they are not the same.

A $10,000 position with a stop 5 percent away has $10,000 of notional but only $500 of risk. Always size on risk, not notional, so leverage does not trick you.

Formula / example: Risk = stop distance x size, not the full notional

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