Risk Management 101: Protecting Your Capital

Many traders focus solely on strategy and entries, neglecting the most critical aspect of trading: Risk Management. You can have the best strategy in the world, but without proper risk management, you will eventually blow your account.

The 1% Rule

Never risk more than 1-2% of your total account balance on a single trade. This ensures that a string of losses won't wipe you out. It keeps your emotions in check and allows you to trade another day.

Risk to Reward Ratio (RR)

Always aim for a Risk to Reward ratio of at least 1:2. This means for every dollar you risk, you aim to make two. With a 1:2 RR, you can be wrong 50% of the time and still be profitable.