1. Introduction

Money management is the backbone of successful trading. Even the best strategy will fail without proper risk control.
Most new traders lose money not because they lack knowledge — but because they ignore risk and trade without discipline.

This guide explains the essential rules professionals follow to protect their accounts and grow steadily.

2. Rule #1: Risk Only 1–2% Per Trade

The biggest mistake beginners make is risking too much on a single trade.

Why 1–2% Works

• Keeps your account safe from big losses

• Allows you to survive losing streaks

• Builds long-term consistency

Example

If your account balance is $500:

• 1% risk = $5 per trade

• 2% risk = $10 per trade

This rule alone can save you from blowing your account.

3. Rule #2: Always Use Stop Loss

A trade without a stop loss is pure gambling.

Benefits

• Protects your capital

• Prevents emotional decisions

• Stops small losses from becoming big ones

Golden Rule:
Set your stop loss based on market structure, NOT emotions.

4. Rule #3: Position Sizing (Lot Size Calculation)

Choosing the right lot size determines how much money you risk.

Formula

Lot Size = (Account Balance × Risk %) ÷ Stop Loss (pips)

Example

• Account: $200

• Risk: 2% → $4

• Stop Loss: 20 pips

Lot size = 4 ÷ 20 = 0.20 lots

Correct position sizing = safe risk + stable growth.

5. Rule #4: Avoid Over-Leveraging

High leverage looks attractive but destroys accounts instantly.

Safe Leverage Levels

• Beginners: 1:50 – 1:100

• Experienced traders: 1:200

• Avoid: 1:500+

Tip:
If you use high leverage, lower your lot size even more.

6. Rule #5: Follow the 80/20 Risk Allocation

Never put all your money into one trade.

Professional Approach

• Use only 20% of your balance as active trading capital

• Keep 80% as reserve capital

This prevents deep drawdowns and panic trading.

7. Rule #6: Maintain a Risk-Reward Ratio (RRR) of at Least 1:2

A good RRR ensures you earn more on wins than you lose on losses.

Example

If you risk $10, aim to make at least $20.

This means even with a 40% win rate, you can still be profitable.

8. Rule #7: Limit Your Daily Losses

Even professionals stop trading when they hit a limit.

Daily Limit Rule

Stop trading if you lose 5% in a day.

This prevents revenge trading and protects your mental state.

9. Rule #8: Keep a Trading Journal

Record:

• Entry

• Exit

• Stop loss

• Lot size

• Emotion during trade

• Mistakes & lessons

A journal turns your trading into a measurable business.

10. Conclusion

Money management is what separates losing traders from profitable traders.
If you follow the rules in this guide — risk control, stop loss discipline, lot size calculation, and emotional balance — your long-term success rate will improve dramatically.

Trading is not about winning big, but about protecting your capital and growing steadily.

Keep learning. Keep controlling risk.
Trade smart — not hard.

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