Essential Knowledge

Trading Risk Management —
Protect Your Capital First

Position sizing, stop-loss placement, risk/reward ratios, and trading psychology. The rules that separate consistently profitable traders from those who blow up their accounts.

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The Core Rules

5 Risk Management Rules Every Trader Must Follow

These rules apply to every trade, every asset, every strategy — from beginners to professionals.

01
Never risk more than 1–2% per trade
The single most important rule in trading. If you risk 1% of your account on each trade, you can lose 20 consecutive trades and still have 82% of your capital. Risking 10% per trade means a run of 10 losses wipes you out completely.
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
Always set a stop-loss before entering
A stop-loss is a pre-defined exit point that limits your downside. Setting it before you enter — not after — removes emotion from the decision. "I'll set it later" is how traders turn small losses into large ones.
Stop-loss placement: Below the recent swing low for long trades. Above the recent swing high for short trades. Never at a round number where the market is likely to hunt stops.
03
Only take trades with at least 2:1 reward-to-risk
Risk/reward ratio is your target gain divided by your maximum loss. A 2:1 ratio means you're aiming to make $200 for every $100 you risk. At 2:1, you only need to win 34% of trades to break even. Most beginners ignore this completely.
Example: Entry $100, Stop $95 (risk $5), Target $110 (reward $10) = 2:1 ratio. This is the minimum to trade profitably with a moderate win rate.
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.
Exception: Trailing a stop upward to lock in profits as price moves in your favour is always acceptable and recommended.
05
Diversify across uncorrelated assets
Putting your entire account into one trade or one asset class concentrates risk. If you have three open trades that are all highly correlated (e.g., BTC, ETH, and SOL), a market-wide selloff can hit all three at once. Spread risk across different asset classes.
Simple rule: No more than 30% of capital in one sector. If you're in crypto, balance with stocks or forex positions that move independently.
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
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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.
Practice Risk-Free

Learn Risk Management With $100k Virtual Money

TradeProview's paper trading simulator lets you practise position sizing, stop-loss placement, and trade management with $100,000 in virtual capital — at live market prices, with zero financial risk.

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