Risk Management for Forex Traders
Position sizing, stop losses, and the math behind surviving long enough to profit.
Risk management isn't optional. A 50% loss requires a 100% gain to break even.
The 1% Rule. Never risk more than 1-2% of your account on a single trade.
Position Sizing Formula. Position Size = (Account Balance × Risk %) / (Stop Loss in Pips × Pip Value).
Stop Loss Placement. Place stops at technical levels, not at arbitrary distances. Use ATR to calibrate.
Risk-Reward Ratio. Aim for a minimum 1:2 risk-reward ratio. With 1:2, you only need 34% win rate to break even.
Correlation Risk. Trading multiple correlated pairs simultaneously multiplies your exposure.
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