Risk in Four Dimensions: Size, Stop, Target, Time

Every trade has four dials that can be set before entry: how big it is (size), where it's wrong (stop), where it's finished (target), and how long it's allowed to take (time). Most traders manage the first dial, negotiate with the second, and never touch the other two — and the time dial is the one almost nobody uses at all.

In the book I split trading risk into four named types: capital risk, psychological risk, transaction risk, and fundamental risk. On any single trade, those types show up as the four dials above — capital risk is the size dial, transaction risk is the stop dial, the projection is the target dial, and the cycle clock plus the calendar are the time dial. Psychology isn't a dial; it's the hand turning all four, and I'll get to it. Everything here comes from trading one method — FLD interactions on the 80-day cycle — but the four-dimension frame stands on its own. The cycle structure underneath it is on the methodology page.

How big should a position be? (the size dial)

Capital risk is worked through with one number: 1% of the account per trade sequence. A trade sequence is the total amount of trading done for one interaction — one meeting between price and the FLD — and each half of the 20-day cycle carries one interaction. So the 1% is not per order. Get stopped out and re-enter inside the same interaction, and both orders live inside the same 1%.

Here is what that number does across a cycle and a year:

The worst-case year assumes losing every one of the roughly five prominently tradeable interactions in each of the roughly five 80-day cycles a year contains. That is the worst case the math allows — and the instruction in the book is to plan as if it could happen. Nobody expects to lose every sequence for a year. The size dial exists so that even that year is survivable.

Two rules ride along with the number. First, if stress is climbing — losses piling up without journal entries, the work bleeding into your sleep — scale the size down; the halved setting exists for exactly that moment. Second, correlated positions count as one position: correlated sectors and stocks accumulate losses much faster than a single index does, so three names in the same sector at 1% each is not three sequences. It's one oversized one.

Where does the stop belong? (the stop dial)

Two different risks get confused here, and the book keeps them separate. Capital risk is how much you lose if the stop is hit. Transaction risk is how likely the stop is to be hit. They pull in opposite directions: a stop 1% from the market gets hit far more often than a stop 10% away — that's higher transaction risk — while the wider stop forces a smaller position to keep capital risk at the same 1%. The stop dial is not "how much pain can I take." It's a trade-off you price on purpose.

Transaction risk also compares entries, which is the less obvious use. Hurst's own treatment scores an "A" interaction entry as higher transaction risk than a "C": at the A, the trader knows only that enough days have passed for a new 80-day cycle to be plausible; by the C, the A has already happened and the cycle's turn is visible in the market. Same stop distance, different information, different odds of getting stopped. Stop placement is an information question before it is a price question. The full letter sequence is at the eight FLD interactions.

In practice, at the A interaction — where price oscillates around the FLD and belief is hardest to hold — the book's approach is a protective stop one to two percent below entry, taken without argument if it's hit, with re-entry allowed when price clears a previous day's high. Capital gets protected first. The opinion can be re-established later.

What is the target, really? (the target dial)

In this method the target comes from the FLD: when price crosses the line, the cross projects a measured move (how that works). But here's what makes the target a risk dial rather than a profit fantasy: its main job is to change how the stop behaves.

The stop-movement sequence from the book, in order:

1. At entry: the initial protective stop, sized so the sequence risks 1%.
2. The moment the projection completes: the stop moves to break even. From this point the planned risk is roughly zero — a gap or fast tape can still take more than planned, which is why size was set first.
3. As the move continues: a 3-bar trailing stop — for a long, if price falls below the lowest point of the last three bars, the trade is over. That can trigger on day 4, day 10, or day 20; whenever it occurs.
4. If a new 20-day cycle trough forms above the entry: the stop goes below that trough. The book's example: an A-interaction entry that has run about 35 days into an apparent E interaction — the stop moves below that 40-day cycle low.

Notice that nothing in the sequence says "exit at the target." The target's function is to collapse the trade's planned risk toward zero, then hand the exit to structure. The trade ends where the cycle says it ends, not where a hope number was written down.

Why is time the dimension nobody manages? (the time dial)

Because nothing forces you to. The broker makes you choose a size. The platform asks for a stop. Nobody asks how long the idea has to work. In this method, time shows up twice, and both uses are set before entry.

The cycle clock. Every interaction occupies a defined slice of the structure — each half of the 20-day cycle carries one. The trade's reason lives inside that window, and when the window closes, the reason is gone whether or not the stop was hit. Missing a window is also not an emergency: there are roughly five 80-day cycles in a year, each carrying several tradeable interactions. The book's stance is blunt — if you missed a sequence, or fear kept you out, or you were away from the desk, move on to the next sequence. The opportunities repeat. Forcing a stale one doesn't work.

The calendar. Fundamental risk is mostly time risk: holding a new trade overnight through a stop; days with a Federal Reserve speaker; elections; war headlines; and the holidays — New Year's and Christmas specifically — when the market pulls its tricks and volatile tape has a way of not honoring stops. I'll say the honest part in first person: a lot of the losses I've taken in my career are attributable to fundamental risk — holding positions when I shouldn't have, and trading through periods that were not honoring stops. The fix is unglamorous: know the calendar before entry, and be able to monitor and move stops at the end of each day, because the FLD level changes every day.

A "time stop" is simply this made explicit — an exit triggered by elapsed time rather than by price. In a cycle method it isn't an add-on. The window is defined before the trade exists.

What does a missing dial look like on a real call?

We log market calls in public and score them later — hits and misses both, because the misses carry the lesson. Here's one where the read was one-dimensional and the outcome shows the other three dials:

2026-07-09 — logged on the 4PM show: "AMD did give the signal today. It opened above the 20-day and 40-day FLD... signaling a reason to go long there... The sector supports it. The market is positive." What happened: it worked for exactly one session — up about 2% the next day — then gave it all back and more, finishing about 9% below the call level by July 17. Scored: miss on our public ledger.

Direction, sector, market: all named at entry. Size, stop, target, time: none stated. As a broadcast observation that's fine — it wasn't a trade plan, and it's scored as the miss it became. But as a trade, the difference between a scratch and a 9% hole on that chart lives entirely in the dials the call never set. The same session had a read that did it right: an index call that stated its invalidation out loud at entry — that day's session low. The level broke about a week later, and that call was scored a miss too. A cheap, clean, gradeable miss, because the where-it's-wrong dial was set in public before the outcome existed.

Where does psychology fit if it isn't one of the four?

Underneath all four. My estimate in the book is that 70% of the work a trader must do is psychological. Traders like to blame transaction risk — wrong entry, wrong stop placement — but the compounding damage comes from the psychological side: doubling down, taking too many entries in one sequence, letting the risk appetite bloat past 1%, stacking correlated names that lose together.

The fixes in the book are structural, not motivational, and every one of them turns a dial down:

• Halve the size when stressed. The 0.5% setting is a psychological tool wearing a math costume.
• Trade one instrument. One is enough to learn the method on.
• Trade only the clearest interactions. The book points at C and F — for many traders that's a dozen or so entries a year, and that's a full practice.
• Leave the market alone when it's tearing you up. Standing aside is a real position.
• Journal every trade into a dataset. That's the DataMine, and it's where the two enemies the book names — ego and "magical thinking" — go to get measured instead of indulged.

And the honest milestone, stated plainly: the first goal the book sets is break even, arrived at over and over, not a number. It took me years to get there and the road was ugly. No one trades well all the time — the four dials are what keep a bad stretch from becoming a final one. None of this promises an outcome. Risk numbers cap the damage; they don't create results.

Questions traders ask

How much should I risk on a single trade?

The model in the book is 1% of the account per trade sequence — everything done for one interaction — halved to 0.5% when losses or stress climb. I don't present that as the universal right number for everyone. The point is that the number is fixed before entry, the sequence is the unit rather than the individual order, and the worst-case arithmetic for a cycle and for a year is known in advance and survivable.

What is a time stop?

An exit triggered by elapsed time instead of price. The idea you entered on has a window; when the window closes, the trade closes, even if the price stop was never hit. In this method the window is built in — each interaction occupies half a 20-day cycle — so the time stop is defined before the trade exists instead of improvised after it stalls.

Isn't the target just where I take profit?

Not here. The projection's main job is to change the stop: the moment the projection completes, the stop moves to break even, and from there a 3-bar trailing stop or the next cycle trough manages the exit. Completing the projection collapses the planned risk toward zero — never all the way, since gaps don't honor stops. Structure decides where the trade actually ends.

Do correlated positions count as separate trades?

No. Correlated sectors and stocks accumulate losses much faster than a single index does — three names moving together are one position at triple size, whatever the account screen says. The size dial counts exposure, not tickers.

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