Protecting Your Capital Like a Pro

Successful trading isn’t just about making profits—it’s about protecting your capital. That’s where risk and trade management come in. Even the best trading strategy can fail without solid risk controls.

Why Risk Management Matters

Every trade involves risk. Markets are unpredictable, and no setup is 100% guaranteed. Risk management helps you:

• Minimize losses
• Stay in the game long-term
• Trade with confidence—not fear or greed

Without proper risk control, a few bad trades can wipe out your account.

Key Principles of Risk Management

1. Risk Only What You Can Afford to Lose

A common rule is to risk 1–2% of your total capital per trade. For example, if your account is $1,000, don’t risk more than $10–20 on any single trade.

2. Use Stop-Loss Orders

A stop-loss is a predefined point where you exit a losing trade. It helps you:

• Limit losses
• Avoid emotional decisions
• Stick to your plan

Always set a stop-loss before entering a trade.

3. Position Sizing

This means calculating how many units (shares, lots, coins, etc.) to trade based on your risk per trade. Larger trades = higher risk. Adjust your size to match your stop-loss and risk percentage.

4. Maintain a Risk-to-Reward Ratio

Aim for a risk-to-reward ratio of at least 1:2. This means you risk $1 to potentially make $2. Over time, this ratio helps keep you profitable even with some losing trades.

Trade Management: Managing Active Positions

Managing trades doesn’t stop after entering. Here’s how to control open positions:

1. Don’t Move Your Stop-Loss (Unless Tighter)

It’s tempting to give a trade “more room,” but moving your stop further away usually leads to larger losses. If anything, adjust it closer once the trade is going your way.

2. Use Trailing Stops

Trailing stops move with the price, locking in profits as the trade moves in your favor. They help you stay in winning trades longer—without giving back gains.