Chapter 6: Risk Management – Your Survival Skill

Forget the hype — risk management is the one thing that separates traders who stay in the game… and those who blow their accounts in a week. Protecting your account is more powerful than chasing profits.

Why Most Traders Lose?

Because they focus too much on making money… And not enough on how not to lose it. The truth? You don’t blow an account from one bad trade — You blow it from ignoring risk management over and over.

The 1 Rule in Forex: Survive First

You can’t win the game if you’re not in it. Every top trader you admire today? They didn’t just master strategy — They mastered self-control. Risk management isn’t a suggestion. It’s the foundation of long-term success.

Core Principles of Smart Risk Management

1. Risk Only What You Can Lose Comfortably

Start with this mindset:

“If this trade goes wrong, will I sleep tonight?”

Risk 1% or less per trade — even if it feels “small.”Small losses = survivable. Big losses = emotional damage.

2. Always Use Stop Loss (SL)

No SL? You’re trading on hope. SL isn’t weakness — it’s a seatbelt. Set it before the trade — not when things go wrong.

3. Know Your Risk-to-Reward Ratio (RRR)

Only take trades where the reward is worth it.Ideal ratio? 1:2 or higher (You risk $10 to gain $20+) If your wins are bigger than your losses, you don’t have to be right all the time.

4. Don’t Overleverage

Just because your broker gives you 1:1000 leverage doesn’t mean you should use it. Keep your margin level healthy. Use leverage as a tool, not a trap.

5. Avoid Revenge Trading

Losses happen. But doubling your next trade to “get it back fast” is a trap. Emotional decisions destroy accounts.

Learn to pause, breathe, and protect your capital.

Example: Risk Management in Action

You have $1,000. You decide to risk 1% per trade = $10.

You find a trade setup with:

• SL = 20 pips

• TP = 40 pipsThat’s a 1:2 ratio.

With proper lot size, Even if you lose 5 trades and win 3, you still come out ahead.

That’s mathematical edge, not emotional chaos.

Other Tips Real Traders Use:

• Use a journal: Record every trade, why you entered, and the result.

• Know your drawdown tolerance: How much can you lose before it hurts?

• Walk away after 2–3 losses in a row. Reset your mind.

  
  

“You can’t control the market, but you can control how you trade it.Risk small. Lose slow. Win smart.”

Risk management isn’t boring. It’s how you stay alive in this game. It’s the reason professional traders last years, while emotional traders burn out in weeks. Make it your edge — not an after thought.