Risk management is the foundation of successful trading. Learn how to protect your capital and trade sustainably.
Position Sizing
Never risk more than 1-2% of your account on a single trade. Calculate position size based on your stop loss distance and account size.
Stop Losses
Always use stop losses. Place them at logical levels based on your analysis, not arbitrary pip amounts. Never move stops further from entry.
Risk-Reward Ratio
Aim for at least 1:2 risk-reward (risk $1 to potentially make $2). This means you can be profitable even with a 40% win rate.
Emotional Control
Don't revenge trade after losses. Stick to your plan. Take breaks when emotional. Your mental state affects trading decisions.
Capital preservation is priority one. Consistent small gains compound over time. Losses are part of trading - manage them, don't avoid them.