🛡️ Risk Management: The Skill That Separates Survivors from Casualties
Why risk management beats prediction
Nobody predicts the market consistently. Professionals win maybe 40–50% of trades — and still profit because their winners are larger than their losers. That is risk management: surviving losses so profits can compound.
The 1–2% rule
Risk no more than 1–2% of your account on any single trade. With a $1,000 account that means risking $10–20 per trade. If your stop-loss is 5% away from entry, your position size is $200–$400 — the calculator does this for you in seconds.
Position sizing formula (learn it once)
Position size = (Account × Risk %) ÷ (Entry − Stop-loss). Example: $2,000 account, 1.5% risk ($30), entry $60,000, stop $57,000 ($3,000 distance) → $30 ÷ $3,000 = 0.01 BTC. Use our position size calculator every trade.
Stop-losses are non-negotiable
A stop-loss is where you admit the trade is wrong. Questions to answer before entering: where is my stop, and why there? If you cannot answer, you are not ready to enter. Trailing stops lock in profit as the trade moves your way.
Risk-reward ratio
Aim for at least 1:2 — risking $1 to make $2. With 1:2 and only a 40% win rate you still profit over time (40 wins × 2 − 60 losses × 1 = +20). Low risk-reward is the hidden killer of many accounts.
Portfolio rules
- Never put more than 5–10% of your account in one coin.
- Avoid averaging down into losers without a plan — it is how small losses become huge ones.
- After a big win, bank some profit. After a big loss, reduce size until your confidence returns.
Related: First steps · Trading psychology