#Binance
🎯 Risk Management in Trading: The Key to Survival and Success in the Market 💼📉
Risk management is the backbone of any successful trading strategy. You may have the best technical or fundamental analysis strategy, but without effective risk management, you are exposed to significant losses.
✅ What is Risk Management?
It is a set of rules and plans aimed at minimizing potential losses and protecting capital from collapse. Simply put: how much will you lose if things go wrong?
💡 Practical Examples:
📌 1. 1% or 2% Rule
Do not risk more than 1-2% of your capital in a single trade.
🔹 Example:
If your capital is $10,000, do not risk more than $100 - $200 in each trade. This means that if you place a stop loss order 50 points away, the contract size should be calculated so that the maximum allowable loss is not exceeded.
📌 2. Use of Stop Loss
Always set a maximum loss before entering any trade.
🔹 Example:
You bought the EUR/USD pair at 1.1000 and expect it to rise to 1.1100, set the stop loss at 1.0970. If the market loses, the trade will close at a specified loss, instead of deteriorating further.
📌 3. Risk-Reward Ratio (R:R)
Do not enter a trade with a potential return lower than double the potential loss (at least 1:2).
