How to Manage Investment Risk

6 min read · Feb 24, 2026

How to Set Risk-Reward Ratio

Before entering a trade, decide how much you can lose first, then define how much you aim to gain.

• Example: stop at -1R, target +2R or +3R
• Even with under 50% win rate, a good risk-reward profile can sustain long-term survival
• Track both risk-reward and win rate to evaluate strategy quality

Position Size Calculation

• $10,000 account with 1% risk per trade = $100 risk budget
• If stop distance is $2, position size is 50 shares
• Formula: size = allowed loss 첨 (entry price - stop price)

Core Risk Management Routine

• Before entry: define scenario, stop, and target first
• After entry: predefine rules for moving your stop
• After exit: review performance using R-multiple metrics

The core is avoiding catastrophic loss rather than maximizing profit. Protecting your account keeps you in the game for the next opportunity.

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