Risk management
Definition
Risk management is the set of rules that protect the deposit: a trade size of 1–2% of capital, a daily loss limit, a pause after a losing streak. The main job is preserving capital: a 20% drawdown needs +25% to recover, a 50% drawdown needs +100% — not losing matters more than earning fast.
Why preserving beats earning
Losses and recovery are asymmetric: the percentages down and up are computed from different bases.
| Drawdown | Needed to recover |
|---|---|
| −10% | +11.1% |
| −20% | +25% |
| −33% | +50% |
| −50% | +100% |
Every extra percent down makes the way back longer — which is why all risk-management rules are built as brakes: they trigger before the drawdown gets expensive. Your own numbers are easy to check in the drawdown recovery calculator.
The basic rule set
- Risk per trade — 1–2% of the current deposit. Ten straight losses at 2% is a drawdown of about 18%: unpleasant but workable.
- A daily loss limit — say, −6% per day or three losses in a row. Once it triggers, the session is over; the decision was made in advance, not in the moment.
- A pause after a streak — at least until the next day. The worst trades are opened in the "I'll win it back now" state.
- Drawdown zones — a plan written out in advance: around −10% — cut risk and take a break; −20% — pause until the end of the day; −30% — stop for a day or two and review the strategy.
What the rules share: they are stated in numbers and before trading. "I stop when it feels off" is not a rule — it is a mood.
In the terminal
In BinoView Supercharts part of the rules moves to automation: trading bots take a series-length limit and a bank per series (the Masaniello mode), after which the bot stops on its own. The series statistics — earned, lost, current drawdown — are visible in the terminal, so drawdown zones are tracked by fact rather than by feel.
How it differs from money management
Money management decides how much to put into the next trade — size and growth. Risk management decides when not to trade — limits, pauses, drawdown zones. In practice they only work as a pair: the right trade size without limits does not stop the revenge spiral, and limits without the right size trigger too late.
Frequently asked questions
What rules are the bare minimum?
Three: risk per trade of 1–2% of the current deposit; a daily loss limit after which trading ends regardless of the urge to win it back; a pause after three straight losses. That set is enough to keep one bad session from turning into a catastrophe for the account.
Why a daily limit if every trade is already capped at 1–2%?
Because the main risk is not one trade but the state after a losing streak. The urge to win it back pushes toward bigger amounts and entries without a setup — and that is the mode in which deposits are lost. The limit cuts the spiral mechanically: the rule decided in advance that trading is over for today.
What to do after the limit triggers?
Do not trade until the next day — and spend the time on a review: check every trade of the day against the strategy's rules. If the entries followed the rules, it was an ordinary streak and nothing needs changing. If half the trades were outside the setup, the problem is not the market, and the return should happen at reduced risk.