tradingsurvival

Risk management is not just a safety net; it is the specific system used to control losses and protect your trading capital. Without a strict risk plan, even a highly profitable strategy will eventually fail. A few bad trades should never have the power to wipe out your account.

WHY IT IS CRUCIAL

Markets are inherently unpredictable. No matter how good the analysis is, probabilities dictate that losses will occur. Risk management:

1. Protects against emotional trading (fear and greed).
2. Ensures long-term survival so you can stay in the game long enough to be profitable.
3. Stabilizes your equity curve, avoiding massive drawdowns.

OUR CORE RISK RULES

1. PER TRADE RISK LIMIT
Never risk more than 0.7% to 2% of your total account balance on a single trade. This ensures that a losing streak does not destroy your capital.

Example:
If you have a $10,000 account, your maximum risk per trade should be between $70 and $200.

2. DAILY LOSS LIMIT
Do not open too many positions simultaneously. You must have a hard stop for the day. Your total daily loss limit should be a maximum of 15% of your portfolio. If you hit this limit, stop trading immediately for the day to prevent emotional revenge trading.

KEY TOOLS FOR RISK CONTROL

Use a Risk Calculator to automate your position sizing. Do not guess your lot size.

Stop Loss (SL): An order that automatically exits a losing trade at a specific price. This is your insurance policy. Never trade without it.

Take Profit (TP): An order that locks in gains at predefined levels.

Risk-to-Reward Ratio (RRR):

Always aim for 1:2 or better. This means if you are risking 50 pips/5%, your target should be at least 100 pips/10%. With a 1:2 ratio, you can be wrong 50% of the time and still be profitable.

ADVANCED TACTIC: MOVING STOP-LOSS TO ENTRY (BREAK-EVEN)

Moving the Stop-Loss to the Entry price is a technique used to eliminate risk exposure in an active trade. It involves adjusting your stop loss level to the exact price where you entered the market.

Why do this?

If the trade reverses against you after moving to entry, you lose $0. You have eliminated the risk while keeping the potential for profit open.

ADVANCED TACTIC: CLOSING PART OF A TRADE (PARTIALS)

You do not have to close 100% of a trade at once. Closing a portion (partial closing) is vital for managing psychology and banking revenue.

By taking profits on 50% or 75% of a position, you lock in gains immediately. You can then leave the remaining portion of the trade running to catch a larger trend with zero stress, as you have already banked profit.

COMING UP NEXT
In the next article, we will be diving into Types of Traders & Their Risk Management Styles

Disclaimer: This content is for educational purposes only and does not constitute financial advice. Trading involves significant risk.
- Tuffy (Team Mubite)

#RiskManagement #CapitalProtection #TradingSurvival #RiskReward