Risk management is the single most important skill in trading. It is the practice of sizing positions, placing stop losses, and structuring risk-reward ratios so that no single trade can damage your account. Strong risk management lets you survive losing streaks and compound winners over time.
Key principles
Position sizing — risk a fixed small percentage of your account per trade (commonly 0.5–2%).
Stop losses — define your invalidation level before entering, never after.
Risk-reward ratio — favor setups where the target is at least 2x the stop distance.
Drawdown control — pause and review after a defined drawdown threshold.