Risk management does not eliminate loss. It expresses a planned loss in position size, then records what happens when the assumptions fail. RS, ADR and pass counts do not calculate an account's risk limit.
Complete the sizing calculation
For a hypothetical 10-million-won account, 0.5% planned risk is 50,000 won. Entry at 10,000 and a planned exit at 9,500 give 500 per share: 100 shares and one million won invested. The 0.5% input illustrates arithmetic; it is not a personal allocation recommendation.
A fill at 9,000 instead of 9,500 loses 100,000, twice the plan, before costs. The SEC's order guide explains that a stop price does not guarantee a fill there. A stop-limit order may remain unfilled.
Keep the R denominator fixed
With the initial 50,000 planned risk as 1R, a pre-cost profit of 100,000 is +2R and the gap loss above is −2R. Changing the denominator after moving a stop makes comparisons inconsistent. Partial exits require the sum of actual quantities and fills. A retrospective chart-peak R is not realized performance.
Recovery and concurrent positions
After a 20% loss, recovery requires 1/(1−0.20)−1=25%. Three positions with 0.5% planned risk each sum to 1.5%, but simultaneous gaps can exceed it. See Investor.gov on diversification. Different industry labels do not prove low correlation.
Records needed for validation
Record dates, signals, order types, planned exits, quantities, actual fills and all costs. The historical model book omits the full failure universe and actual costs, so it cannot validate account drawdown limits.
Data and corrections
See the methodology for calculation rules and the 2026-10-02 signal-disagreement study for the frozen sample. Report a date and URL through contact when you find an error.