No method wins every time. What separates traders who last from those who do not is mostly how they handle losing trades. Risk management is the set of habits that keeps any single loss - or a run of them - small enough to survive.
Decide the loss before the trade
Before opening a position, decide where you would admit the idea was wrong and how much money that would cost. If the honest answer is "more than I can comfortably lose", the position is too large.
The 1% guideline
A common rule of thumb is to risk no more than 1-2% of the account on one trade. That does not mean the position is worth 1% of the account; it means the distance to your exit point, multiplied by the position size, equals 1% of the account.
Example. Account of 2,000 euros, 1% risk = 20 euros. If your exit point is 40 pips away on EUR/USD, each pip may cost no more than 0.50 euros, i.e. roughly half a micro lot.
Stop-loss orders and their limits
A stop-loss order closes a position automatically at a chosen level. It is a useful discipline tool, but not a guarantee: if the price gaps past the level (over a weekend or after unexpected news), the order is filled at the next available price, which can be much worse. Some providers offer guaranteed stops for an extra fee.
Understand drawdowns
A drawdown is the fall from an account's peak to its low. Recovering from losses is harder than it looks:
| Loss from peak | Gain needed to get back |
|---|---|
| 10% | 11% |
| 25% | 33% |
| 50% | 100% |
| 75% | 300% |
Correlation: hidden concentration
Three positions can be one bet in disguise. Buying EUR/USD, GBP/USD and AUD/USD at the same time is largely a single bet against the US dollar, and all three can lose together.
Keep a journal
Write down why you entered, where your exit was, the size, the result and how you felt. After fifty entries, patterns appear: the times of day you trade badly, the setups that never work, the moments you moved a stop. That record is worth more than any indicator.
Know when to stop
Set a maximum loss per day or week, and stop when you reach it. Trading to "win it back" is the single most common way a bad day becomes a disastrous one. If trading is affecting your sleep, finances or relationships, take a break and talk to someone you trust.
This guide is general education, not personal advice. Rules differ by country; check your regulator's website for the requirements that apply to you.