Risk before reward
Every trade can lose. Decide the maximum acceptable loss before placing an order. Many traders use a small fixed percentage of account equity, but the correct level depends on personal circumstances and should never threaten essential money.
Position sizing
Position size should be calculated from three inputs: account equity, the amount you are prepared to lose, and the distance between entry and stop-loss. A wider stop normally requires a smaller position to keep monetary risk unchanged.
Stop-loss discipline
A stop-loss marks the price where your trade idea is invalid. Place it from market structure and volatility, not simply at a convenient cash amount. Slippage can occur during fast markets, so a stop order cannot always guarantee the exact exit price.
Risk-to-reward
Risk-to-reward compares the planned loss with the planned gain. A favourable ratio does not make a weak trade good, and a high win rate does not make oversized risk safe. Evaluate win rate, average win, average loss and trading costs together.
Control combined exposure
Several positions can represent the same underlying bet. Buying EUR/USD and GBP/USD may create concentrated US-dollar exposure. Review all open positions together and set a limit for total account risk.
Daily protection rules
Set a maximum daily loss, a maximum number of trades and a rule to stop after emotional or impulsive decisions. Keep a journal. Consistency and survival matter more than recovering a loss quickly.
- Never add risk only to recover a losing trade
- Pause after reaching the daily loss limit
- Review execution, not only profit
- Reduce size during unfamiliar volatility
Forex and CFD trading involves substantial risk. Practise with a demo account and never risk money you cannot afford to lose.