Risk Management

The discipline of surviving long enough for your edge to play out.

Difficulty advanced

Reading order

1. Position Sizing — the most important variable
2. Stop-Loss Strategies — exit discipline
3. Kelly Criterion — optimal growth, with caveats
4. Drawdown Management — sizing down through losses
5. VaR and CVaR — tail-risk metrics
6. Tail-Risk Protection — convex hedges
7. Correlation Analysis — the input to portfolio risk
8. Hedging Strategies — neutralizing exposures
9. Portfolio Optimization — combining positions efficiently
10. Stress Testing — what breaks when things go wrong

What you should walk away with

• A position-sizing algorithm you'd be comfortable putting real money behind.
• The math and intuition for tail-risk metrics — and their limitations.
• A repeatable stress-testing process.

Next section

Market Microstructure →