1. Define your total risk: Decide the total amount you’re willing to risk.
This helps you to control your losses.
Don’t put more than 3℅ of your total capital at risk.
2. Define your risk per trade: Decide the amount you’re willing to risk in a particular trade.
It will help you to control the amount you’re willing to lose in a single trade. Pre decide the number of trades you’re going to take in a single day. Please don’t overtrade.
Total Risk = Risk per trade * No. of trades
3. Define your position sizing: Pre decide the entry/exit point and stop-loss/target.
This helps you to remain cool & calm during the trading hour. Remember, always
Position sizing is the king in risk management.
Position Sizing = Risk per trade/ Stop-loss
4. Define your risk to reward ratio: A high risk to reward ratio will make you a profitable trader. Similarly, a low risk to reward ratio will eat away your capital.
Please make a proper risk to reward ratio before trading.