Risk management is the practice of identifying, assessing, and controlling potential losses in trading. It encompasses position sizing, stop losses, risk-reward ratios, portfolio diversification, and emotional discipline. Effective risk management is the single most important factor separating profitable traders from unprofitable ones. The goal is not to avoid losses entirely but to keep them small and controlled relative to gains.
A risk management plan might include: risk no more than 1% of account balance per trade, always use a stop loss, maintain a minimum 1:2 risk-reward ratio, never add to a losing position, and take no more than 3 correlated trades simultaneously.
Ready to trade?
A-Book execution, 100+ instruments, and 24/5 multilingual support.