Back to Risk Management

Risk Calculation Modes

Understand the Fixed, Dynamic (compounding), and Fixed Amount risk modes and when to use each

TradeLog's risk modes determine how your risk-per-trade amount is computed. Fixed and Dynamic (compounding) risk a percentage of your balance, and a third option -- Fixed Amount -- risks a flat currency amount per trade instead of a percentage: in the risk profile you fill in either the percentage or the fixed amount (the other field locks automatically), and the flat amount stays constant regardless of balance. The mode you choose affects R-multiple calculations, position sizing suggestions, and risk badge assignments throughout the application.

Fixed Risk Mode

In Fixed mode, your risk per trade is always calculated from your starting balance, regardless of current PnL. This provides consistent position sizing throughout your trading journey.

  • Formula: Risk Amount = (Risk % / 100) x Starting Balance
  • Example: 1% risk on $50,000 starting balance = $500 per trade, always
  • Best for: Traders who want consistent sizing and are not compounding gains
  • Advantage: Simple, predictable position sizes that do not change
Visual comparison of the two risk modes and their formulas

Dynamic Risk Mode (Compounding)

In Dynamic mode -- the compounding option -- your risk per trade is calculated from your current balance (starting balance plus realized PnL plus deposits minus withdrawals). Your position size grows as your account grows.

  • Formula: Risk Amount = (Risk % / 100) x Current Balance
  • Example: 1% risk, started at $50,000, now at $55,000 = $550 per trade
  • Best for: Traders who want to compound gains and increase position size as profits accumulate
  • Advantage: Accelerates growth during winning streaks; naturally reduces size during drawdowns
TradeLog also has a temporary Drawdown Risk (DD) overlay on top of these modes: Dynamic accounts switch to it automatically during significant drawdown (risk is reduced, shown as "DD Risk (-N%)" in the Journal Mini Dashboard) and revert automatically on recovery; Fixed accounts can opt in from the drawdown banner. Prop firm drawdown rules are configured separately on the Prop Firms page.
If you are unsure which mode to use, start with Fixed. It is the simplest and most predictable. Switch to Dynamic once you are consistently profitable and want your position size to scale up with your balance.

Was this helpful?

Previous
Understanding R
Next
Risk Calculator