Analyse Trading
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Risk management

Risk management is the set of rules that limit your losses: risk per trade, position size, stops, daily limits and total exposure.

It is the least spectacular part of trading, and the most decisive. A good strategy badly managed ends up losing; an average strategy well managed has a chance of surviving long enough to improve.

The basic rules fit in a few lines: fixed risk per trade, stop set before entry, calculated size, maximum loss per day and per week, an exposure limit on correlated assets, and smaller size during a drawdown.

Write them down, keep them in view and check in your journal that you follow them. A rule you break once every ten trades is not a rule.

The full lessonWriting your own risk management rulesRisk per trade, maximum daily and weekly loss, number of trades, stopping after losses: write your trading risk management rules with a ready-made template.← Full glossary