Good risk management will not make a bad strategy profitable, but bad risk management will ruin a good one. These are the rules that keep traders in the game.
The 1% rule
Risk no more than 1% (at most 2%) of your account on a single trade. With a $1,000 account, a losing trade should cost you about $10. Ten losses in a row — which happens to every trader — would then cost about 10%, not your whole account.
Always use a stop loss
A stop loss is an order that closes your trade automatically at a set price. Decide where it goes before you enter, based on the chart (beyond a swing high or low), not on how much you hope to lose. Never move a stop further away once the trade is open.
Position size from your stop
Position size = Amount at risk ÷ (Stop distance × Value per pip or point).
Example: you risk $10, your stop is 20 pips away on EURUSD, and 0.01 lot is worth about $0.10 per pip. 20 pips × $0.10 = $2 per 0.01 lot, so you can trade 0.05 lots.
Risk–reward ratio
If you risk $10 to make $20, your risk–reward is 1:2. With 1:2 trades you can be right only 40% of the time and still make money before costs. Avoid trades where the potential reward is smaller than the risk.
Set daily and weekly loss limits
Professional traders stop for the day after losing a set amount (for example 3% of the account) and review after a bad week. This prevents "revenge trading" — trying to win losses back quickly with bigger positions.
Keep a trading journal
Record every trade: the reason for entering, entry, stop, target, result and how you felt. After 50–100 trades the journal shows what really works for you.
Extra rules for crypto futures
- Prefer isolated margin and low leverage.
- Watch funding rates on longer holds.
- Do not keep all your capital on one exchange; withdraw profits to your own wallet.
