You can have the best strategy in the world and still blow up your account. Risk management is what keeps you in the game long enough for your edge to play out.
The 1% Rule
Never risk more than 1% of your account on any single trade. With this rule, even a 10-trade losing streak only draws your account down by ~10% — fully recoverable. Professionals trade like marathon runners, not sprinters.
Position Sizing in Practice
📐 The Formula
Position Size = (Account × Risk %) ÷ Stop-Loss Distance
Account £10,000 · Risk 1% (£100) · Stop 50 pips ⇒ Position size = 0.2 lots. No guessing. No emotion.
Stop Losses Are Non-Negotiable
Every trade goes in with a hard stop. No exceptions, no “I will close it manually if it goes against me”. The market has zero respect for your hopes. Pre-defined risk is the only way to trade with a clear head.
Risk Disclosure: Trading involves significant risk. Past performance is not indicative of future results. The information in this article is educational and does not constitute financial advice. Always consult with a regulated financial advisor before making investment decisions.