Successful trading isn’t just about making profits—it’s about protecting capital. Risk management strategies help traders minimize losses and stay in the game longer.
- Stop-Loss Orders – Automatically exit a trade if the price moves against you. A well-placed stop-loss prevents small losses from turning into catastrophic ones.
- Position Sizing – Determines how much capital to allocate per trade. A general rule is risking only 1-2% of total capital per trade.
- Risk-Reward Ratio – Compares potential profit to potential loss. A ratio of 1:2 or higher ensures that even if some trades lose, the wins outweigh them.
By implementing these strategies, traders can manage risk effectively and increase their chances of long-term success in the markets.