Risk Management: The Skill That Keeps You in the Game
The traders who last aren't the ones who win big — they're the ones who never blow up their account.
Key facts
- Risk no more than 1–2% of your account on any single trade.
- A stop-loss defines your exit before emotions take over.
- Position sizing matters more than being 'right'.
- Never add money to a losing trade hoping it recovers.
The 1% rule
Professional traders obsess over how much they can lose, not how much they can make. A common guideline is to risk no more than 1–2% of your total account on a single trade. That way, a string of losses never wipes you out and you stay in the game long enough to improve.
Use stop-losses
A stop-loss is an order that automatically closes your trade if it moves against you by a set amount. Deciding your exit before you enter removes emotion from the moment things go wrong — which is exactly when clear thinking is hardest.
Size your positions
Your position size should be a function of your risk limit and your stop distance — not how confident you feel. Getting this math right is what separates disciplined traders from gamblers.
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