Learn essential risk management strategies that separate successful traders from unsuccessful ones. Master position sizing, stop losses, and psychology control.
These fundamental principles form the foundation of successful trading. Professional traders never compromise on these rules, regardless of market conditions.
The golden rule of trading - only use money you can afford to lose completely
Never risk more than 2% of your account balance on a single trade
For every $1 you risk, aim to make at least $2 in profit
Spread risk across different currency pairs and strategies
Real-world examples of how to calculate position sizes based on account size and risk percentage. Always risk maximum 2% per trade.
Different methods to set stop loss orders. Each has its advantages and is suitable for different market conditions and trading styles.
Based on technical analysis levels like support/resistance
Most common and effectiveUsing Average True Range to set stops based on volatility
Good for volatile marketsSetting stops at fixed pip distances from entry
Simple but not optimalDifferent risk profiles for different trader types. Choose the one that matches your experience level, capital size, and risk tolerance.
Risk-averse, preserving capital is priority
Risk 0.5% to make 2%, 80%+ win rate needed
Balanced approach between growth and safety
Risk 1% to make 2%, 50%+ win rate needed
Growth focused, higher risk tolerance
Risk 3% to make 4.5%, 40%+ win rate needed
The biggest risk in trading is often the trader themselves. Learn to recognize and control emotional responses that lead to poor decisions.
Entering trades hastily due to fear of missing opportunities
Trying to recover losses quickly with larger position sizes
Increasing risk after winning streaks
Over-analyzing and missing trading opportunities
Use this checklist before every trade to ensure proper risk management
You've learned the essential risk management principles. Ready to explore proven trading strategies that work within your risk parameters?