Risk and Mindset
Module 16 — Risk Management Fundamentals
Risk management is not a topic you study after you learn to trade. It is the thing that keeps you in the market long enough to learn to trade.
- Decide the maximum percentage of your account you will risk on one trade — commonly 1% to 2%.
- Place the stop loss where the trade idea is proven wrong, not where the loss feels comfortable.
- Measure the distance from entry to stop in pips.
- Size the position so that distance equals your chosen money risk.
- Check the reward against the risk before entering. If the reward does not justify the risk, there is no trade.
Notice what is missing: no step asks how confident you feel. Confidence is not a risk input.
Key concepts
- Risk is defined before entry
- Stops belong at invalidation
- Capital preservation extends learning time
Practical example
A 1% account risk remains 1% whether the stop is 10 or 50 pips because position size changes.
Common mistake
Moving a stop farther away to avoid accepting a planned loss.
Knowledge check
Check your understanding
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