The number one rule of trading: protect your capital. Everything else is secondary. Without proper risk management, even the best strategy will fail.
Never risk more than 1% of your trading capital on a single trade. If you have a $10,000 account, your maximum loss per trade should be $100. This ensures that a string of losses won't wipe you out.
Position sizing determines how many units to trade based on your stop-loss distance. Use the formula: Position Size = (Account × Risk%) ÷ (Entry − Stop Loss).
AtlaStep's smart calculator does this automatically — enter your account size, risk percentage, and stop loss, and it tells you exactly how many units to trade.
Only take trades with a minimum 1:2 risk-reward ratio. This means you risk $1 to make $2. Even with a 40% win rate, a 1:2 R:R gives you a positive expectancy.
Place stop-losses at technical levels where your setup would be invalidated — below support for long positions, above resistance for shorts. Never move your stop-loss wider once the trade is open.
Risk management isn't just about money — it's about psychology. When you risk too much, fear takes over and you make bad decisions. Proper sizing lets you trade with clarity and confidence.