Trading foundations · 4 min read · Free lesson
Risk management before the entry
Understand your loss budget, combined exposure and what a stop can do.
At a glance
Before entry
Define the loss budget
Across positions
Check combined exposure
If conditions change
Follow a written pause rule
Start with the downside
A risk plan describes what you are prepared to lose on a trade and across a session, before any order is placed. It also defines when you stop taking new trades. There is no single risk percentage suitable for everyone; the instrument, account and personal circumstances matter.
Look across the whole account
Several positions can depend on the same market move. For example, two equity-index trades may both lose during a broad sell-off. Treat each trade’s planned loss as one part of the total exposure. Margin is collateral required to hold a position; it is not the same as the amount you could lose.
A stop has limits
A conventional stop becomes a market order when triggered. Its fill can differ from the trigger price, particularly in a gap or fast market. A stop-limit adds a price condition but may not fill. Check the broker’s terms for the particular order type rather than assuming your planned loss is guaranteed.
Quick check