Risk management is the difference between a trader who lasts ten years and one who lasts ten weeks. Your strategy produces signals; risk management decides whether you're still in the game after the inevitable losing streak.
The 1% Rule
Never risk more than 1% of your account on a single trade. On a $10,000 account, that's $100. If your stop is hit, you lose $100 — 99% of your account survives. You can lose 20 trades in a row and still have 82% of your capital.
Risk per trade = Account Balance × Risk%Position Sizing
Position sizing connects your risk amount to your stop-loss distance. You don't pick lot size randomly — you calculate it so that hitting your stop loses exactly your planned risk.
Position Size = Risk Amount ÷ Stop Distance (in price)Example: $10,000 account, 1% risk = $100. Stop is 20 pips on EUR/USD (pip value ≈ $1 per micro lot on USD-quote). Position = 100 / 20 × 1 = 5 micro lots (0.5 mini lots).
The Risk Calculator in the terminal automatically computes position size from your account, entry, stop, and risk %. You just set the inputs.
Risk-Reward Ratio
R:R compares how much you risk to how much you stand to gain. A 1:2 R:R means you risk $100 to make $200. With a 1:2 R:R, you can be wrong 60% of the time and still break even.
| Win Rate Needed | at R:R |
|---|---|
| 1:1 | 50% |
| 1:2 | 33% |
| 1:3 | 25% |
| 1:5 | 17% |
The Math of Losing Streaks
Losing streaks are normal, not a sign your strategy is broken. Here's how much capital remains after consecutive losses at different risk levels:
| Losses in a row | 1% risk | 2% risk | 5% risk |
|---|---|---|---|
| 5 | 95.1% | 90.4% | 77.4% |
| 10 | 90.4% | 81.7% | 59.9% |
| 15 | 85.9% | 73.9% | 46.3% |
| 20 | 81.8% | 66.8% | 35.8% |
At 5% risk, a 20-trade losing streak leaves you with 36% of your account — and 20-loss streaks happen to every trader eventually. At 1%, you still have 82%.