Time invalidation
Closing because the expected move has not arrived in its window, even though the stop was never hit.
In the chapter
VIIIRisk management
The arithmetic that keeps you alive
From the same chapter
- RThe unit of measurement: 1R is what you lose if the stop is hit. Everything is measured in R, not in currency.
- Structural stopA stop is not a distance: it lives where the idea dies, beyond the extreme of the sweep.
- Position sizeRisk ÷ (stop in points × point value), rounding down. It is derived from the stop, never the other way round.
- Point valueWhat one point per contract is worth: ES $50, MES $5, NQ $20, MNQ $2. It defines how many times you can be wrong.
- Break-evenMoving the stop to your entry. It is justified when STRUCTURE advances, not when you are +1R: otherwise it takes you out of normal retracements.
- PartialClosing part of the position. It trims expectancy and buys staying power: it is a psychological tool.
- Esperanza matemáticaAverage R per trade: (win rate × average win) − (loss rate × average loss). It is the only thing that decides whether a method wins long term, which is why a 40% win rate at 1:3 earns more than 70% at 1:1.
- T1 / T2 / runnerA three-part exit: near target (≥1R), main pool (the DOL) and the remainder with the stop trailing structure.