Risk Management

Trading without risk management is gambling. Here are the unbreakable rules of successful traders:

Rule 1: Never Risk More Than 2%

Never risk more than 1% to 2% of your total account value on a single trade. If you have $10,000, your maximum risk should be $200. This means the distance from your Entry Price to your Stop Loss, multiplied by your shares, should not exceed $200. You would have to lose 50 trades in a row to wipe out your account.

Rule 2: The 1:2 Risk-Reward Ratio

Only take trades where you stand to make twice as much as you risk. If your Stop Loss is going to cost you $50 if triggered, your Target Price should make you at least $100. If you do this, you can be wrong 50% of the time and still make money. StoxPilot automatically calculates this for you!

Rule 3: Cut Losses Early, Let Winners Run

Never hold onto a losing stock hoping it "comes back." If it hits your Stop Loss, sell it mechanically with zero emotion.