Module 12: Risk Management and Trading Psychology
Your Personal Risk Plan
Chapter 14 of 14 · about 5 minutes
14.1 One page that protects everything
"You've learned a lot of rules across twelve modules," said Hash. "The problem with rules spread across more than a hundred and sixty chapters is that you won't remember them when it matters. So let's put the ones that matter most on a single page."
Mint looked doubtful. "Just one page?"
"If it doesn't fit on one page, you won't read it when you're stressed," said Hash. "And stressed is exactly when you'll need it."
14.2 The template
| Section | What it covers |
|---|---|
| 1. My situation | Finances, horizon, and how much I can afford to lose |
| 2. Allocation | How much of my savings is in crypto, and how it's split |
| 3. Security | Custody, backups, and wallet structure |
| 4. Position sizing | Risk per trade, maximum position sizes |
| 5. Leverage | Maximum effective leverage and rules |
| 6. Exits | Stop and profit-taking rules |
| 7. Limits | Daily, weekly, and drawdown limits |
| 8. Behaviour | Rules for after losses and wins, and personal boundaries |
| 9. Review | When I review, and what I check |
14.3 Mint's personal risk plan
1. My situation. Stable job, emergency fund covering six months of expenses. Investment horizon of at least five years for core holdings. I could tolerate my crypto falling 60% without changing my life or needing to sell.
2. Allocation. Crypto is no more than 15% of my total savings. Within crypto: 70% core (BTC and ETH), 25% satellites based on written theses, 5% speculative. No single satellite above 8%. Rebalance quarterly if allocations drift more than 5 percentage points.
3. Security. Long-term holdings on a hardware wallet with metal backup in two locations (Module 2). Separate spending and burner wallets. Exchange balances only for active trading. Monthly approval review.
4. Position sizing. Risk 1% per trade, 0.5% for new strategies. Maximum portfolio heat of 5%. Correlated positions count as one.
5. Leverage. Maximum effective leverage of 1.5x across all platforms. Liquidation price always well beyond my stop. Isolated margin for speculative trades. No leverage on small tokens or memecoins.
6. Exits. Every trade has a stop before entry, never moved further away. Scale out at 1R and 2R, trail the rest. Long-term holdings have written thesis invalidation and cycle-based profit-taking rules.
7. Limits. Two losses in a row or a 3% daily loss: stop for the day. A 6% weekly loss: stop for the week. A 15% drawdown from peak: halve risk per trade and do a full review.
8. Behaviour. No trades within an hour of a strong emotion. No increasing risk after winning streaks. No trading after 11 p.m. No phone in the bedroom. Take one full week off from charts every quarter.
9. Review. Journal every trade. Weekly rule check. Monthly metrics and comparison with holding BTC. Quarterly review of this plan.
Hash read it slowly. "This is a plan someone could actually follow. And it would have prevented almost every mistake you've told me about."
14.4 Making the plan stick
| Practice | Why it helps |
|---|---|
| Print it and keep it visible | You see it when you trade |
| Read it before every trading session | Reconnects you to calm decisions |
| Sign and date it | Makes it a commitment |
| Share it with someone you trust | Adds accountability |
| Update it only during quarterly reviews | Prevents changing rules in the heat of the moment |
| Automate what you can | Stops, alerts, recurring purchases, and limits reduce willpower needed |
14.5 When to change the plan
Change your plan deliberately, not reactively.
| Good reasons to change | Bad reasons to change |
|---|---|
| Your financial situation changed | You just had a big loss and want to win it back |
| Journal data shows a rule isn't working | You just had a big win and feel invincible |
| You've learned something new and tested it | Someone online is making money doing something else |
| Your goals or time horizon changed | The market is exciting right now |
14.6 Module 12 wrap-up
Mint, Node, and Hash met at the end of the module.
"I've learned why risk management comes first, the types of risk in crypto, position sizing, stops and exits, portfolio construction, drawdowns and risk of ruin, leverage across every platform, cognitive biases, fear and greed, handling losses and wins, protecting my wellbeing, journaling, and writing my own risk plan," said Mint.
"And the lesson?" asked Hash.
"Every other module taught me how markets work. This one taught me how I work. My biggest risk isn't the market. It's me, on a bad day, without a plan."
Node nodded. "Decades of investing, and I learned more about my own habits in this module than in all the others. The plan on one page is the most valuable thing I've written about money."
"Next, we take your rules and start turning them into systems," said Hash. "Testing strategies properly, automating what can be automated, and using tools, including bots and AI agents, without handing over your judgement."
14.7 Try it yourself
Write your own one-page risk plan using the template in section 14.2. Be specific: use numbers, not vague intentions. Sign and date it. Share it with someone you trust. Then put a quarterly review date in your calendar.
Key takeaways from this chapter
- A one-page risk plan collects your most important rules in a form you can use under stress.
- Cover your situation, allocation, security, position sizing, leverage, exits, limits, behaviour, and review.
- Use specific numbers rather than vague intentions.
- Make the plan stick by keeping it visible, reading it before trading, sharing it, and automating rules.
- Change the plan deliberately during scheduled reviews, never in reaction to a big loss, a big win, or excitement.
- Your biggest risk is often your own behaviour without a plan.
Coming up in Module 13: Trading Systems and Automation. Defining rules-based strategies, backtesting without fooling yourself, paper trading, exchange APIs, trading bots, on-chain automation, AI agents, and the risks of handing decisions to code.