Who this is for — Anyone trading with rent money or the current account. Without separation, every stop becomes drama and every decision is distorted.
Allocated capital (risk capital) is the share of wealth you dedicate only to trading — mentally and operationally separate from life, savings, and emergencies. It is the base for position sizing and risk limits.
In plain terms — Money you can see burn without changing your lifestyle — «already lost» before the first click.
Separation rules
| Includes | Excludes |
|---|---|
| Dedicated trading account | Emergency fund |
| Defined «loseable» budget | Goal savings (home, kids) |
| Base for % risk/trade | Daily current account |
Example: 100k€ wealth, 10k€ allocated → 1% risk = 100€/trade = 0.1% of vital wealth.
Mistakes to avoid
- Continuous top-up — burn 2k, wire another 2k next week: concept destroyed
- Mental mix — trading P&L = life P&L
- If allocated capital hits zero → stop live, simulation, reallocate only after months of ok process
Typical mistake — «Recover from the bank account» after a losing streak — financial revenge disguised as capital management.
Example — 8,000€ allocated, max −2% daily = −160€. Lose 160€: operational annoyance, zero life impact.
Summary card
- Function: psychological firewall + sizing base.
- Rule: no vital money on exchange.
- Review: rebalance only with markets closed.
Silver path — Plan module. Index: Silver path.