METATrading Academy

Risk management

Risk managementnuksan ko seema mein rakhne ka tareeka

The set of rules that limit how much you can lose per trade, per day and overall, so that a run of losses cannot end your trading.

Risk management is everything you do to make sure losses stay small enough to survive. It covers how much of your capital is at risk on a single trade, usually 1% to 2%; where the stop loss sits; how many positions you hold at once; a daily and weekly loss limit; and how much leverage you use. Suppose you have ₹1,00,000 and risk ₹1,000 per trade. Even ten straight losses, which will happen at some point, cost ₹10,000, and you are still trading. Risking ₹10,000 per trade, the same streak removes everything. Risk management does not make a bad strategy profitable, but it keeps a good strategy alive through its inevitable losing periods. It is the part of trading that beginners skip because it feels boring and slows down the dream. It is also the part that separates people who are still trading five years later.

Lessons that use this term

Video
Risk7 min read

Leverage and spread, in plain language

Leverage makes a position bigger than your cash. The spread is the gap between the buy and sell price. One multiplies your results, the other quietly charges you on every trade.