With pressure building underground, there hasn’t been a real breakout to the upside by U.S. markets. The Nasdaq has put in some nice gains; its chart looks like it wants to build a cup that began its left side on January 6 when the Index topped at 1,666.

But whether it happens this week or this month or a few months from now, the stock market will be coming back. It’s the only thing about the stock market that I’m willing to predict. It always does. Always.

So, as we’ve said here a dozen times or more, you should be working on a Watch List. Even if you’re not buying now, you should have a list of stocks that you would be buying if market conditions were better. Having this kind of list keeps you sharp and forces you to think like a buyer even when buying isn’t a good idea.

Here’s another idea for when we finally get the green light.

Controlling risk in your portfolio is important to avoiding the big losses that can sap your results.

For most people, risk control means diversification. You’re taught to have some assets in growth stocks, value stocks and income stocks. Investment texts tell you that your stocks should also cover the spectrum from large-cap stocks to small-cap stocks.

But you don’t get much advice about how to allocate the money within your growth portfolio. Today I’m going to remedy that.

The more holdings you have, the lower your risk. If you have 50 holdings, it will be hard for the failure of any one of them to deep-six your results.

The problem is that it will be correspondingly difficult for a big rally by one of your stocks to make you a lot of money. For maximum results, you need a concentrated portfolio. Cabot Market Letter–which is considered to be moderately aggressive–is fully invested when it has 12 stocks in the Model Portfolio. Cabot China & Emerging Markets Report is even more aggressive, with a hypothetical portfolio of just 10 stocks when it’s fully invested.

If you decide to go with this kind of concentration in your growth portfolio, you need to follow two rules to control risk.

First, you must set loss limits based on the price at which you bought each position. When markets are challenging–as they are now–your sell discipline should kick in at a minimum of 15% below your buy price. No exceptions. When markets are supportive, you can push that loss limit to 20%. The limits kick in only at the close of a trading day. Intraday moves don’t count, unless a stock is clearly in free fall after bad news. In that case, the quicker you get out the better.

The second risk rule is to use equal dollar positions to build your portfolio. The number of shares you own is totally irrelevant. If you are working on an aggressive portfolio, you should divide the amount of money you have allocated to that portfolio into 10 equal-dollar positions and buy just that amount of each stock. Having 100 shares may be neat, but if you have 100 shares of a stock that trades at 25 and 100 shares of one that trades at 50, your risk exposure in the second stock is twice a big.

Two great building blocks for a sound growth portfolio: Control risk by setting loss limits and equal dollar positions.