Essential Knowledge

Trading Risk Management —
Protect Your Capital First

Learn how position sizing, invalidation, loss limits and review can make risk explicit. These are educational frameworks, not guarantees of profitability.

Practise with Virtual Funds Risk Manager Tool
The Core Rules

Five Risk Questions to Define Before a Trade

These common frameworks help make a plan explicit. Suitable limits vary by person, product, strategy and jurisdiction.

01
Choose a maximum loss before entry
A small percentage cap is a common educational example because repeated losses compound. It is not a universal recommendation; the appropriate limit depends on your circumstances and the product.
Example: $10,000 account × 1% risk = $100 max loss per trade. Set your stop-loss so that if hit, the trade loses no more than $100.
02
Define invalidation before entry
A stop or invalidation level records when the original thesis no longer holds. Real orders can gap, slip or fail, so a stop does not guarantee the maximum loss.
Planning prompt: Identify the evidence that would disprove the thesis, then calculate the virtual position from the chosen maximum loss.
03
Compare possible loss with the planned objective
Reward-to-risk is a planning ratio, not a forecast. A 2:1 example has a theoretical break-even win rate near one-third before fees, slippage, taxes and execution differences.
Example: Entry $100, invalidation $95 and objective $110 gives $5 of planned risk and $10 of planned reward. Neither level is guaranteed to execute.
04
Never move your stop-loss to avoid a loss
Moving a stop-loss further away from price to avoid getting stopped out is one of the most common trading mistakes. It turns a disciplined risk management plan into wishful thinking. You can trail your stop-loss to lock in profits — but never extend it to avoid a loss.
Review prompt: If a level changes, record the new evidence and whether the change followed the original plan.
05
Check concentration and correlation
Several positions can respond to the same market shock. Correlations also change, so diversification can reduce some risks without eliminating loss.
Review prompt: Identify which positions rely on the same asset, sector, currency or macro assumption.
Position Size Calculator

Calculate Your Position Size

Enter your account size, risk percentage, and trade details to calculate the correct position size before entering a trade.

Position Size Calculator
Max $ Risk
Risk Per Share/Unit
Position Size (units)
Position Value
% of Account Used
Pre-Trade Checklist

Before Every Trade

Ask yourself these five questions before placing any trade. If you can't answer all of them clearly, don't enter.

Trade Entry Checklist
What is the trend on the daily chart?
Where exactly is my stop-loss?
What is my target price?
Is my risk/reward at least 2:1?
How much am I risking in dollars? Is it within 1-2% of my account?
Why is NOW the right time to enter — not earlier, not later?
Am I trading the setup, or am I chasing price out of FOMO?
Trading Psychology

The Mental Mistakes That Cost Traders Money

Technical analysis tells you what to do. Psychology determines whether you actually do it. These are the most common psychological traps and how to avoid them.

FOMO — Fear of Missing Out
Chasing a trade that has already moved significantly without waiting for a valid entry setup. Usually results in buying the top or selling the bottom.
Wait for the next setup. There is always another trade.
Revenge Trading
Taking impulsive trades immediately after a loss to try to recover the money. Usually makes the situation worse by adding more risk at a time when you're not thinking clearly.
Take a break after a loss. Log the trade and review it later.
Holding Losers Too Long
Not taking the stop-loss because you believe the trade will recover. "It'll come back" thinking has destroyed more accounts than any other single mistake.
Honour your stop-loss, every time, without exception.
Taking Profits Too Early
Closing winning trades too quickly out of fear they will reverse — then watching price continue to your original target without you.
Set a target before entering. Let the trade work.
Virtual Paper Practice

Learn Risk Management With $100k Virtual Money

TradeProview lets you practise position sizing, invalidation and review with a $100,000 virtual balance using available provider observations. Virtual results do not reproduce real execution or predict future performance.

Start Paper Trading Free Risk Management Course