Why Risk Management Comes First
Even a strong strategy can fail without proper risk management; controlling losses is often more important to long-term results than maximizing individual wins.
Core Principles
- Position Sizing: Risk a small, consistent percentage of your account per trade (commonly 1-2%).
- Stop-Loss Discipline: Always define your exit before entering a trade.
- Drawdown Limits: Set a maximum account drawdown at which you pause trading and review your approach.
- Diversification: Avoid concentrating risk in a single instrument or correlated pair.