How I manage my risk: leverage, stops, and position size
What I learned from losing because I didn't control risk
When I first started out as a trader, risk was the last thing on my mind. I was obsessed with finding the “perfect entry” and multiplying my account as quickly as possible. The problem is that this approach cost me a lot of money. I used too much leverage, placed stops in the wrong places, or worse, didn't place them at all. And my positions were often so large that any move against me knocked me out of the game.
Over time, I understood something painful but necessary: you don't lose because you don't have the best strategy, you lose because you don't know how to control risk. That's when I decided to change.
Step 1: Understand what leverage is and how it works against me
What is leverage really?
Leverage allows you to control larger positions with less capital. It's like a double-edged sword: it multiplies your profits... but it also multiplies your losses.
Hidden risks of high leverage
A small move against you can wipe out your account.
The emotional cost is enormous: you trade with fear and anxiety.
It gives you a false sense of power, but in reality it reduces your margin for error.
Step 2: Set a stop-loss and manage the risk/reward ratio
How to set effective stops
A stop-loss is not a punishment, it is a lifesaver. I learned to place them at logical levels: support, resistance, or based on volatility. I also stopped moving them on impulse. If the price hits my stop, I accept the loss and move on.
Risk/reward ratio (R:R)
I used to set random targets. Now, every trade must have a minimum ratio of 2:1. If I risk 100, I must be able to earn 200. That allows me to be profitable even if I win less than 50% of the time.
Basic formula for calculating your size
I decide how much I am willing to lose (e.g., 1% of my account).
I calculate the distance between my entry and my stop.
I adjust the position size so that the potential loss does not exceed my limit.
Example: if my account has $1,000 and I risk 1%, that's $10. If my stop is at 50 pips, I adjust the lot so that those 50 pips are equivalent to $10.
Adjust size according to volatility
On highly volatile days, my stops should be wider. That means reducing the size of my position so that the risk remains the same
Step 4: Additional strategies that have worked for me
Use of dynamic stops
When a trade turns positive, I move the stop with a trailing stop. This ensures that I protect part of the profit and reduces the possibility of a pullback taking me out at a loss.
Daily loss limit
I have a personal cap: if I reach a certain level of losses in a day, I close the platform. That simple rule saved me from falling into revenge trading and ruining an entire week in a few hours.
Backtesting and simulations
Before implementing new risk rules, I test them in backtesting or on a demo account. I'd rather make mistakes on paper than with real money.
Benefits of robust risk management
Survive to trade another day
My priority is no longer to win quickly, but to stay in the game. The key is to protect my capital
Cooler decisions
By having clear rules, I no longer enter with fear or the pressure to always be right. My decisions are more objective.
Improved consistency
My results are no longer a roller coaster ride. My capital curve is now more stable, which gives me the confidence to continue in the long term.
Conclusion
What saved me as a trader was not a magic strategy, but the discipline to manage risk. I learned that leverage should be used sparingly, that a well-placed stop is your best ally, and that risking little on each trade gives you mental freedom.
My advice: review your latest trades and ask yourself how much you really risked. If the answer makes you uncomfortable, that's your cue that it's time to adjust. Because in this game, it's not the one who risks the most who wins, it's the one who knows how much they can lose without being knocked out.
