EdgityCore — Core Concepts — Understanding Risk (R)

Core Concepts — Understanding Risk (R)

One of the most common questions traders ask is:

"Why does EdgityCore start with the Stop Loss instead of the Take Profit?"

The answer is simple. EdgityCore is risk-driven, not profit-driven.

Many trading tools begin with a desired profit target and treat the Stop Loss as something to add afterwards. EdgityCore works the other way around.

Before a trading signal can be evaluated, one question must be answered first:

How much risk does this signal require?

Once that risk is known, it becomes the signal's Risk Unit, also called 1R. Everything else is calculated from that single value.

Signal │ ▼ Stop Loss (the risk) │ ▼ 1R │ ├── RML = 0.5R (default) ├── TP2 = 1.0R (default) ├── TP3 = 1.5R (default) ├── TP4 = 2.0R (default) └── TP5 = 2.5R (default)

This approach provides several important advantages.

• Every signal is measured using the same unit.
• Every profit level has a clear meaning: it is a stated multiple of the risk taken.
• Win Rate, Profit Factor, Net Points and Drawdown are all calculated from the same definition of risk.
• Statistics remain consistent across all EdgityCore strategies.

The profit levels are therefore not arbitrary price targets. They are risk multiples.

A Worked Example

Suppose a signal requires a Stop Loss of 150 points. That distance is the Risk Unit, 1R. With the default settings:

The exact numbers matter less than the relationship. A trader using EdgityCore is always judging reward relative to the original risk.

If the same signal had a 300-point Stop Loss on another symbol, every level would simply double — the same structure, the same language, a different size.

Why Not Start With the Take Profit?

Suppose a tool began with a Take Profit instead:

Entry ↓ Take Profit = 500 points ↓ Stop Loss = ?

There is no single correct answer. Should the Stop Loss be:

• based on ATR?
• below the previous swing?
• a fixed number of points?
• a percentage of price?
• based on market structure?

Each choice gives a different risk for the same profit target, and different strategies would produce different answers. Their results could not be compared fairly.

By defining the risk first, EdgityCore makes sure every signal is evaluated in the same language: R.

An Important Distinction

This does not mean that the way the Stop Loss is chosen is fixed forever. How a Stop Loss distance is determined is one question. What is done with it afterwards is another.

Whatever method sets the initial Stop Loss, the architecture that follows stays the same:

Risk ↓ 1R ↓ Profit levels (RML, TP2 … TP5) ↓ Trade outcome ↓ Performance statistics

• The Stop Loss defines the Risk Unit.
• The Risk Unit defines the profit levels.
• The profit levels define how the signal is evaluated.

This risk-first architecture is one of the fundamental design principles of EdgityCore.

Where You See It in the Product

• The chart. The Stop Loss line and the profit-level lines are drawn at multiples of the same distance.
• The statistics panel. Win Rate, Profit Factor, Net Points, Average R/R and Drawdown are all measured against that distance.
• The Risk Mitigation Level. The RML is the first level on the ladder, placed at a fraction of the risk. See The Risk Mitigation Level (RML) — Why One Level Changes Everything.
• Net Points. Every outcome adds or subtracts a multiple of the Stop Loss distance. See How Net Points Are Calculated.
• Statistics definitions. See the Statistics Report Guide.

© 2026 Marc Quentier. All Rights Reserved. This document is part of the EdgityCore Suite. No part of this publication may be reproduced, distributed or transmitted in any form or by any means without the prior written permission of the copyright holder, except as permitted by applicable copyright law.