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RISK MANAGEMENT It's probably the most important thing about trading that usually gets taught last or discovered after blowing an account or losing big on a trade. In order of important you have risk management, exits, and then entries. Most think they are getting bad entries and that's why they are bad at trading, that's not actually the case because a bad entry with a good exit and proper risk management can still be a good trade. The opposite applies for a great entry but bad risk management and a bad entry, you can end up losing, round tripping, or over managing a trade and making less than you would had you gone smaller and forgot about it. 1% RISK PER TRADE - THE SWEET SPOT Everyone is in a different financial position but there's something about 1% risk per trade that seems to work at all different tax brackets. 1% doesn't mean 1% growth, it means you are risking 1% of your entire 100% account size. That means if a trade goes wrong, and idea doesn't work, or a big gamble doesn't pay off the most damage you can do is 1%. Some might be fine with 2 to 3% risk, maybe you are in growth mode and have income coming in to make up for losses. Either way 1% is a great place to start. And just because you only risk 1% that doesn't mean you can only make 1%. Say you have a $100k account size and you take a trade with 10% of your portfolio because you are confident. If you put a 10% stop loss on that trade, that means at most you will lose 1% of your account value. But say that position doubles, you've now made 10%. Do this twice in a row and you've outperformed the market (Over 15 to 20% is usually considered beating the average return in the market). In that same example say you were wrong twice, you've only lost 2% of your account. The third trade if you hit a 20% trade you've just recovered your losses. Small losses are easier to recover too. Putting 50% of your portfolio into a trade that then gets cut in half means you've lost 25% of your entire portfolio. Meaning you'd then have to make an absolute monster trade with size to recover or a ton of small ones. That's when a lot of people get emotional and start revenge trading. We've all done it, where you take a trade knowing it's a stupid idea but if it just works out you can make your money back. We are all human, you'll make mistakes, go bigger than you should, and sometimes sure it will work out too. But if you can start executing with discipline, make trading boring, and slow yourself down most will realize they'll end up making more than they thought and will have finished the year higher up by spending less time on screens, feeling less stressed, and being able to enjoy the process of making money.

Published Jan 14, 2026Updated Jan 14, 20267 min read
RISK MANAGEMENT It's probably the most important thing about trading that usually gets taught last or discovered after blowing an account or losing big on a trade. In order of important you have risk management, exits, and then entries. Most think they are getting bad entries and that's why they are bad at trading, that's not actually the case because a bad entry with a good exit and proper risk management can still be a good trade. The opposite applies for a great entry but bad risk management and a bad entry, you can end up losing, round tripping, or over managing a trade and making less than you would had you gone smaller and forgot about it. 1% RISK PER TRADE - THE SWEET SPOT Everyone is in a different financial position but there's something about 1% risk per trade that seems to work at all different tax brackets. 1% doesn't mean 1% growth, it means you are risking 1% of your entire 100% account size. That means if a trade goes wrong, and idea doesn't work, or a big gamble doesn't pay off the most damage you can do is 1%. Some might be fine with 2 to 3% risk, maybe you are in growth mode and have income coming in to make up for losses. Either way 1% is a great place to start. And just because you only risk 1% that doesn't mean you can only make 1%. Say you have a $100k account size and you take a trade with 10% of your portfolio because you are confident. If you put a 10% stop loss on that trade, that means at most you will lose 1% of your account value. But say that position doubles, you've now made 10%. Do this twice in a row and you've outperformed the market (Over 15 to 20% is usually considered beating the average return in the market). In that same example say you were wrong twice, you've only lost 2% of your account. The third trade if you hit a 20% trade you've just recovered your losses. Small losses are easier to recover too. Putting 50% of your portfolio into a trade that then gets cut in half means you've lost 25% of your entire portfolio. Meaning you'd then have to make an absolute monster trade with size to recover or a ton of small ones. That's when a lot of people get emotional and start revenge trading. We've all done it, where you take a trade knowing it's a stupid idea but if it just works out you can make your money back. We are all human, you'll make mistakes, go bigger than you should, and sometimes sure it will work out too. But if you can start executing with discipline, make trading boring, and slow yourself down most will realize they'll end up making more than they thought and will have finished the year higher up by spending less time on screens, feeling less stressed, and being able to enjoy the process of making money.