Let me save you years of pain: the difference between profitable traders and everyone else is not intelligence, not fancy indicators, and not luck. It's risk management.
The #1 Rule
Never risk more than 1-2% of your portfolio on a single trade. If you have a $10,000 account, your max loss per trade is $100-$200.
This ensures that even a 10-loss streak only draws down 20% of your account — and you can recover from that.
Position Sizing Formula
Position Size = (Account x Risk%) / (Entry - Stop Loss)
Example: $10K account, 1% risk ($100), entry at $50, stop at $45 ($5 risk) = 20 units.
The Golden Rules
1-2% risk per trade. 1:3 minimum risk/reward. Always use stop losses. Never average down. Walk away when you're emotional.