Risk Management

Risk Management

Risk management is the most important aspect of trading. Without solid risk management, long-term success is impossible. Even the best strategy will fail if risk is not controlled.

The 1% Rule

Never risk more than 1-2% of your total capital per trade. With an account of 10,000€, this means a maximum of 100-200€ risk per trade. This way you survive even longer losing streaks (drawdowns).

Position Sizing Calculation

The correct position size results from:

• Account Size × Risk per Trade (%) = Risk Amount in €
• Risk Amount ÷ Stop-Loss Distance (in Pips/Points) = Position Size

Example: 10,000€ account, 1% risk = 100€. Stop-Loss is 50 Pips away → 100€ ÷ 50 Pips = 2€ per Pip = 0.2 Lots on EUR/USD.

Stop-Loss & Take-Profit

Always set a Stop-Loss to limit your risk. Your Take-Profit should be at least 2 times your risk (Risk-Reward-Ratio of 1:2). With a RRR of 1:2, you're profitable even with only 40% win rate!

Risk-Reward-Ratio (RRR)

RRR	Min. Win Rate for Profit
1:1	51%
1:2	34%
1:3	26%

Drawdown Management

• Maximum Drawdown – Define in advance how much you're willing to lose (e.g. 10% of your account)
• Daily Loss Limit – Stop after 2-3 losses in a day and analyze
• Weekly Limit – Maximum 5% loss per week, then take a break

Diversification

Spread your risk across different assets and markets. Don't open multiple correlated positions at the same time (e.g. EUR/USD and GBP/USD long simultaneously doubles your effective risk).

The Golden Rules

• No trade without Stop-Loss
• Never move your Stop-Loss further away from entry
• Never risk more than you're willing to lose
• Secure profits through Trailing-Stops or partial exits
• Strictly stick to your trading plan