Risk management is the skill that keeps you in the game. The goal is not to avoid losses, it is to make them survivable.
Position sizing: size = (account risk % × account equity) ÷ stop distance. A 0.5–1% risk per trade is a common starting point.
Always use a stop loss. A trade without a stop is a trade without a defined risk, and that is how small mistakes become account-killers.
Your risk-reward ratio compares the potential gain to the potential loss on a trade. It does not guarantee wins, but a reasonable ratio means you do not need a high win rate to be net positive over time.
Understand drawdown: it is the decline from your equity peak. On a prop evaluation, both a daily and a maximum drawdown limit are usually enforced. Respecting those limits is not optional, it is the rule.
Trading involves risk. Simulated practice is not a guarantee of live results.
Takeaways
- Risk management keeps you in the game; the goal is survivable losses.
- Sizing = (risk% x equity) / stop distance; 0.5-1% per trade is a common start.
- Respect daily and maximum drawdown limits - they are the rules, not suggestions.
Self-check
What is drawdown?
The decline from your equity peak; deep drawdown is much harder to recover from than it looks.
Trading involves risk. Educational only, not advice. Mark it complete to bank progress.