Plan for being wrong.
A practical foundation for thinking about losses.
Start with capacity for loss
Risk tolerance is how a loss feels; risk capacity is how it affects your life and obligations. Consider emergency savings, debts, income stability, and when you need the money. Do not rely on a market position to meet an immediate essential expense.
Size and concentration matter
A small position in a volatile asset can behave differently from a concentrated portfolio. Consider correlated holdings, leverage, and liquidity. A stop order is not a guaranteed loss limit: gaps and poor liquidity can produce a worse execution.
Review the whole plan
Look at the possible range of outcomes rather than a single target return. Keep records, question assumptions, and review as your circumstances change. Seek qualified, regulated advice for decisions specific to your situation.