Position sizing determines how much capital is allocated to any single investment relative to total portfolio size. Correct position sizing ensures that even when a thesis is wrong — which will happen regularly — the loss is absorbed without structural damage to the portfolio. It is how professional investors survive long enough to compound.

Risk-reward ratio compares the potential loss on a position (risk) to its potential profit (reward) if the thesis proves correct. A 1:3 risk-reward means risking 1 unit to potentially gain 3. Professional analysts typically require a minimum 1:2 ratio before any position is considered — ensuring that being right less than half the time can still be profitable.

Defining downside risk before entry converts investing from a hope-based activity into a decision-based one. When you know in advance exactly where you are wrong and how much that costs, you remove the two most destructive emotional behaviours in markets: holding losing positions too long and making reactive decisions under pressure.

Capital preservation is the priority of protecting existing portfolio value over maximising returns. In professional risk management, losing less during adverse markets is often more valuable than gaining more during favourable ones — because recovered losses require outsized gains. A 50% loss requires a 100% gain to return to the starting point.

No. Technical analysis cannot eliminate risk — no analytical method can. It improves the probability of being correct, identifies levels where a thesis is invalidated, and supports better-timed entries and exits. Risk is inherent in all markets. Technical analysis manages it more intelligently; it does not remove it.