Risk management separates profitable traders from those who lose deposits. Without it, no strategy saves your account. This guide provides a framework specifically for Indian traders depositing INR.
The 2% Rule
Never risk more than 1-2% per trade.
| Account | 1% Risk | 2% Risk | Losses to Lose 50% |
|---|---|---|---|
| ₹8,400 ($100) | $1 | $2 | 35 trades at 2% |
| ₹42,000 ($500) | $5 | $10 | 35 trades at 2% |
| ₹84,000 ($1,000) | $10 | $20 | 35 trades at 2% |
Position Sizing Formula
Size = Risk Amount / (Stop Loss Pips x Pip Value)
Example: $500 account, 2% risk ($10), 40-pip SL: $10/(40x$0.10) = 0.025 lots, round to 0.02.
Stop Loss Strategies
- Technical: Beyond support/resistance levels
- ATR-based: 1.5x ATR for the timeframe
- Avoid fixed-pip stops: Adjust per market conditions
Loss Limits
- Daily: Stop after 5% loss
- Weekly: Stop after 10% loss
- Monthly: Reduce size by 50% after 15% loss
Common Mistakes
- Averaging down on losing positions
- Moving stops further away
- Over-leveraging (use appropriate leverage)
- Revenge trading after losses
- Ignoring pair correlation
Conclusion
Apply the 2% rule, calculate sizes mathematically, use technical stops, set loss limits. These disciplines keep your account alive through inevitable losing streaks.
Frequently Asked Questions
What is the 2% rule?
Never risk more than 2% of account balance per trade.
How to calculate position size?
Risk Amount / (SL pips x pip value per lot).
Always use stop loss?
Yes, every trade. Never trade without a hard stop loss.