hard · Order Flow Analysis

What does a 'Pain Threshold' formula N = lfloor Threshold / (S × T) rfloor aim to achieve in professional risk management?

1. It ensures that the position size is always proportional to the daily ATR (Average True Range) of the instrument.
2. It calculates the minimum profit target required to achieve a 2:1 risk-to-reward ratio on every execution.
3. It determines the maximum number of consecutive losses an account can survive before hitting a margin call.
4. It keeps the absolute dollar risk per trade constant regardless of the structural width of the stop-loss.

Sign up free to see the explanation and track your rank →