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Two Traders, Two Outcomes: The Power of Risk Management
Meet Sandra and Emmanuel. Both start with a $1,000 trading account.
Sandra takes an aggressive approach, risking $250 per trade. She’s the kind of person who might jump out of a plane without checking if the parachute works.
Emmanuel, on the other hand, is cautious. He risks just $20 per trade—probably has multiple insurance policies and wears a helmet to bed.
Both use a strategy with a 50% win rate and a 1:2 risk-to-reward ratio.
Over the next 8 trades, the sequence of outcomes is:
Loss, Loss, Loss, Loss, Win, Win, Win, Win
Sandra’s Result:
-4 losses at $250 each = - $1,000
Account blown.
Emmanuel’s Result:
-4 losses at $20 = -$80
+4 wins at $40 = +$160
Net profit = +$80
The takeaway?
Losses are inevitable in trading—what matters is how you manage them. With proper risk management, losses remain manageable—more like an “ant bite” than a knockout punch.
Meet Sandra and Emmanuel. Both start with a $1,000 trading account.
Sandra takes an aggressive approach, risking $250 per trade. She’s the kind of person who might jump out of a plane without checking if the parachute works.
Emmanuel, on the other hand, is cautious. He risks just $20 per trade—probably has multiple insurance policies and wears a helmet to bed.
Both use a strategy with a 50% win rate and a 1:2 risk-to-reward ratio.
Over the next 8 trades, the sequence of outcomes is:
Loss, Loss, Loss, Loss, Win, Win, Win, Win
Sandra’s Result:
-4 losses at $250 each = - $1,000
Account blown.
Emmanuel’s Result:
-4 losses at $20 = -$80
+4 wins at $40 = +$160
Net profit = +$80
The takeaway?
Losses are inevitable in trading—what matters is how you manage them. With proper risk management, losses remain manageable—more like an “ant bite” than a knockout punch.
Disclaimer: Includes third-party opinions. No financial advice. May include sponsored content. See T&Cs.
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