Cheat sheet
Managing risk cheat sheet
The key points from the Managing Risk path on a single page. Use it as a quick reference when you plan a trade. It is educational and general in nature, not investment advice.
Risk per trade
- Risk per trade is the share of your capital you accept losing on a single position.
- Keeping it small and consistent limits the damage any one losing trade can do.
- It is decided before entry and drives the position size.
Risk-to-reward ratio
- The ratio compares the risk, from entry to stop, with the intended reward, from entry to target.
- It is written risk first: 1:2 means risking one to aim for two.
- It describes the shape of a trade you plan, not its outcome, which is never certain.
Leverage as risk
- Leverage magnifies gains and losses on exactly the same scale.
- A position larger than your deposit moves your balance faster in either direction.
- Let the risk you are willing to accept decide the leverage, not the other way around.
Trading psychology
- Emotion tends to follow an open position: fear, hope and the urge to act.
- A plan made while calm is easier to follow than a decision made under pressure.
- Discipline is sticking to the exits you set in advance.
Building a trading plan
- Write down what you trade, when you trade it, and why.
- Define entry conditions, stop-loss, take-profit and risk per trade in advance.
- Review your trades to learn from them, and keep the plan simple enough to follow.
Educational and general in nature, not investment advice or a personal recommendation. Trading carries risk to your capital.