Who this is for — Anyone who wants to trade sustainably and clearly separate money at operational risk from money meant for everyday life.
In plain terms — Allocated capital is the trader's professional budget: a defined quota, protected and consistent with your risk profile.
Bronze prerequisite — Before this lesson: trading-journal, discipline, capital, percentage-risk. See bronze-path.
Separating capital from personal needs
Allocated capital must not include essential expenses, emergency funds, or short-term debt.
This separation reduces psychological pressure and prevents decisions driven by financial urgency.
In the plan, define the initial quota, criteria for increasing it, and a threshold for temporary reduction.
Without this frame, even a good strategy becomes fragile in losing phases.
Link to risk and size
From allocated capital derive max-daily-risk and risk per trade via position-sizing.
When capital changes, size and limits must change proportionally.
This keeps the results curve more stable and protects the account from deep drawdowns.
Example — Total wealth €100,000; allocated trading capital €20,000. Risk per trade 0.5% of allocated capital (€100). This way a single mistake does not destabilise the entire portfolio.
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- What it is: capital quota dedicated exclusively to trading.
- When to use it: in initial planning and periodic reviews.
- Typical mistake: increasing allocated capital after a winning streak without criteria.
Silver path — Module: Trading plan. Part of silver-path.