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Understand risk, sizing, and protective exits
Read the dollar meaning of limits and learn why a planned loss, stop, or pause cannot guarantee a maximum loss.
Amount invested and planned loss are different
Position size describes how much you buy or sell. Planned risk estimates loss at an assumed adverse exit price. A small planned loss does not protect the rest of the invested amount.
For a fictional $10,000 account, a $500 stock position uses 5% of account value. If that fictional position is ten shares bought at $50 with an assumed exit at $48, the planned loss is $20, or 0.2% of the account, before costs. Those are different percentages describing different things; neither percentage is a setting recommendation.
Read each field's unit. Some Risk & Trading limits are percentages of account value, so the dollar amount they allow changes with that value. Other controls use counts, ratios, or an on/off choice. Check the unit before copying a number from one field to another.
Read Settings → Risk & Trading
Before you start: Open Settings → Risk & Trading and identify the selected account. Read each value and its unit before changing it.
The table lists the rule names you will see. The first eight are set in Risk & Trading; the last three appear only when a plan is refused.
Review the saved limits
Open Risk & Trading, read values and units, and compare dollar amounts with the account shown.
You should see: You distinguish position, planned-loss, and account-wide limits.
If you get stuck: Unavailable account value can make dollar previews unavailable.
Verify any intentional change
Choose Save & Apply at the bottom of Settings, read any confirmation, and reopen the section to verify the saved value.
You should see: The saved value and units match your intention.
If you get stuck: A rejected save is not an applied limit. Correct the reported input error.
| Rule name | What it controls |
|---|---|
| Biggest position I'll take | Limits capital allocated to one trade; it is not the same as loss at the stop. |
| Most I'll lose on one trade | Checks the plan's estimated loss against your ceiling. The label does not guarantee the final loss. |
| Every trade needs an exit price | Requires a planned loss-control exit. A planned price still needs a valid, working order to provide protection. |
| What I'm going for has to beat what I'm risking | Checks the plan's reward relative to its estimated risk. A ratio does not measure probability of winning. |
| Most trades open at once | Limits the number of concurrent positions. |
| Stop for the day after I'm down this much | Uses a daily-loss threshold to pause trading. Existing positions and orders still need review. |
| Don't stack up in one industry | Limits concentration in similar businesses. |
| Most of my account I'll have in play | Limits total exposure. Values above 100% involve borrowing or leverage and are a separate risk decision. |
| Don't trigger Pattern Day Trader restrictions | On an Interactive Brokers account below the $25,000 pattern day trader minimum, blocks a new entry when the broker reports no day trades remaining. |
| Never buy in without an exit order in place | Refuses an order that would open or add to a position without a protective stop. |
| Don't trade until the emergency stop has been tested | Refuses live orders until that broker's emergency cancel has been tested recently (within 30 days by default). The test is in the Execution panel in the top bar. |
- Open Risk & Trading (in the desktop app)
Why the final result can exceed the plan
Protective orders and checks reduce particular risks without removing market risk. A calculated entry-to-exit loss is not a guaranteed cap. Dashboard gap-exposure and missing-protection information provide additional context.
- Slippage: the actual execution price differs from the price you expected.
- Spread, commissions, and fees: the available buying and selling prices differ, and charges reduce the result. The Local account charges no commission, so its results leave this cost out.
- Gaps: prices can jump across an exit level, especially between trading sessions or around sudden news.
- Stop execution: a triggered stop may execute at a worse price; a stop-limit order may not execute at all if its limit cannot be met.
- Partial fills and unavailable liquidity: only part of a requested transaction may complete.
- Missing or interrupted protection: an intended exit may be rejected, cancelled, unavailable, or not yet confirmed.
A pause is not a position close
Pausing new execution, a strategy, or a schedule has a different scope from closing a position. To stop all new orders, open Execution in the top bar and choose Pause new execution. A pause does not cancel orders already working or close open positions: close a position with Close Position on its Dashboard row, and use your broker's own platform for anything else. Pausing also ends any live permission you gave in Chat.
Understand a failed limit before changing anything. The plan may need revised terms, fresh information, or no trade. Raising the limit changes your risk decision without fixing the idea.
Continue in the website manual
These online references extend this lesson with existing setup instructions and technical detail. They need an internet connection. The downloadable guide keeps all beginner lessons available offline.
Check your understanding
Practice questions only. Answers do not change accounts, orders, or permissions.