Mechanical Wrong Point

The mechanical wrong point is where your thesis fails, not where the loss becomes uncomfortable and not an arbitrary number of pips away. It answers a simple question before entry: what would price have to do for the market to contradict the structure I am trading?

A useful wrong point comes directly from the thesis. If the trade depends on a breakout being accepted above a prior boundary, deep return into the old range may invalidate that idea. If the trade depends on a directional structure preserving a particular swing, crossing that structure may be the wrong point.

Defining it first has two benefits. It makes the thesis falsifiable, and it gives risk management something objective to work from. Position size can then be adjusted to the distance between entry and invalidation instead of moving the invalidation to fit a preferred lot size. The wrong point belongs to the structure; position size belongs to the account.