Risk Management Essentials

Risk Management

Risk management is THE most important skill in trading. Without it, even the best strategy will eventually blow up your account.

🛡️ The 1-2% Rule

Never risk more than 1-2% of your account on a single trade.

Example: With a £10,000 account, risk max £100-£200 per trade.

Why? Even 10 losing trades in a row only costs 10-20% of your account. You can recover!

🛑 Stop Loss Orders

A stop loss automatically closes your trade at a set price to limit losses.

Rules:

• ALWAYS use a stop loss - no exceptions!
• Set it BEFORE entering the trade
• Place it at a logical level (below support for buys)
• Never move it further away to avoid being stopped out

🎯 Take Profit Orders

Automatically closes your trade when you hit your profit target. Locks in gains without emotion.

⚖️ Risk-Reward Ratio

Compare potential loss to potential gain.

• 1:2 ratio = Risk £50 to make £100
• 1:3 ratio = Risk £50 to make £150

With a 1:2 ratio, you only need to win 40% of trades to be profitable!

📊 Position Sizing

Calculate your position size based on:

1. Your account size
2. Risk percentage (1-2%)
3. Distance to stop loss in pips

Use our Position Size Calculator to practice!

Golden Rules

1. Never risk more than you can afford to lose
2. Always use a stop loss
3. Maintain good risk-reward ratios
4. Don't over-leverage