Why risk management comes first
No trading method wins every time. Losing streaks of five, eight or more trades happen even to experienced traders. Risk management makes sure a losing streak is a setback, not the end of your account.
Rule 1: Risk a small, fixed percentage per trade
Many educators suggest risking no more than 1-2% of your account on any single trade.
| Risk per trade | Account left after 10 losses in a row |
|---|---|
| 1% | about 90% |
| 2% | about 82% |
| 5% | about 60% |
| 10% | about 35% |
Rule 2: Calculate position size every time
Lots = (account × risk %) ÷ (stop loss in pips × pip value per lot)
Example: $500 account, 1% risk = $5. Stop loss 25 pips on EUR/USD ($10 per pip per lot): $5 ÷ (25 × $10) = 0.02 lots.
Use the position size calculator so you never have to guess.
Rule 3: Set a daily or weekly loss limit
Decide in advance, for example: "If I lose 3% in a day, I stop trading until tomorrow." Most large losses happen when traders try to win back losses immediately.
Rule 4: Respect the maths of drawdowns
| Loss | Gain needed to recover |
|---|---|
| 10% | 11% |
| 20% | 25% |
| 50% | 100% |
Protecting capital matters more than chasing big wins.
Rule 5: Only trade money you can afford to lose
Never trade with money needed for rent, school fees, business stock or emergencies, and never borrow to trade.