Risk management
Risk per trade, per day and across open positions, sized to survive the evaluation rules.
Risk management decides whether you are still trading next month. Good analysis with poor risk management fails; average analysis with excellent risk management often succeeds.
Risk per trade
Decide a fixed percentage of the account you lose if the stop is hit. Then size the position from the stop distance (see the Position Calculator).
| Risk per trade | Losses in a row to lose 5% |
|---|---|
| 2% | 2–3 |
| 1% | 5 |
| 0.5% | 10 |
| 0.25% | 20 |
With a 5% daily limit, risking 2% per trade means three losers in one session can end the account. At 0.5% you can be wrong ten times in a row.
Risk per day
Set a personal daily stop well inside the official limit, for example half of it. When you reach it, stop trading for the day. Days where you push on to win back losses are where most accounts are breached.
Risk across open positions
The daily limit counts all floating losses together. Add up the risk of every open position. Correlated positions, such as long EUR/USD and long GBP/USD, are one larger bet.
Reward-to-risk
Aim for targets at least as far as your stop, ideally further. With 2:1 reward-to-risk you can be right only 40% of the time and still make money.
Protect profits
Once a trade has moved 1R in your favour, many traders move the stop to break-even. You give up some winners that would have retraced and continued, but you stop good trades from turning into losers.
A risk checklist before every trade
- Is the stop at a level that proves me wrong, not just a round number?
- Is the size calculated, not guessed?
- Does total open risk stay inside my daily stop?
- Is a high-impact release due before this trade is likely to finish?
Are you ready for the exam?
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