Ask a hundred losing traders what went wrong and almost none will say their entries were bad. They will say they blew the account. Risk management is not the boring part of trading. It is the part that decides whether you are still here in a year.
The 1% rule
Risk a small, fixed percentage of your account on every trade. One percent is a good starting point. On a £3,000 account that is £30 per trade. It sounds small until you do the maths the other way: at 1% risk you can lose ten trades in a row and still have over 90% of your account. At 10% risk, ten losers and you are done.
How to calculate your position size
Your lot size comes from three numbers: your account size, your risk percentage, and your stop loss distance in pips. The formula is simple:
- Work out your risk in pounds: account size × risk %. £3,000 × 1% = £30.
- Measure your stop loss in pips. Say 20 pips.
- Divide risk by stop distance: £30 ÷ 20 = £1.50 per pip.
- Choose the lot size that makes one pip worth roughly £1.50. On gold that is about 0.15 lots.
The stop loss decides the size, never the other way round. If the setup needs a 40 pip stop, you trade half the size. You do not squeeze the stop tighter to afford a bigger position.
Risk to reward
We look for trades that pay at least two or three times what we risk. With a 1:3 risk to reward, you can be wrong more often than you are right and still grow the account. That is the maths behind every setup we post.
The rules that protect you
- Set a daily loss limit. Two losing trades and you stop for the day.
- Never move a stop loss further away. Moving it to breakeven once a trade is in profit is fine.
- Size down after a losing streak, not up. Revenge sizing is how accounts die.
None of this is exciting. That is the point. Exciting trading is usually expensive trading.