In trading, **profits are optional, but risk is guaranteed**. Yet, thousands of Indian traders lose their entire capital within months — not because they lack strategies, but because they ignore **risk management**. If you’ve ever doubled your position after a loss or skipped a stop-loss “just this once,” this article will show you the exact mistakes that can **wipe out your account** and how to avoid them.
Why Risk Management is More Important Than Strategy
Did you know? Even a 70% accurate strategy can fail without proper risk control. Risk management is the only thing that stands between a **temporary drawdown** and a **permanent account blow-up**.
- Protects your capital so you can trade another day
- Prevents emotional overtrading after losses
- Keeps drawdowns manageable
- Allows small profits to compound over time
Top Risk Management Mistakes That Destroy Accounts
1. Risking Too Much Per Trade
New traders often risk 10–20% of their account per trade, thinking they’ll “recover faster.” In reality, **risk more than 2% per trade**, and a few bad trades can wipe you out.
2. No Stop-Loss Discipline
Not using stop-loss is like driving without brakes. Market volatility can erase weeks of profits in hours.
3. Averaging Down in a Losing Position
Adding more to a losing trade (“martingale”) can lead to catastrophic losses during strong trends.
4. Ignoring Position Sizing
Trading random lot sizes without calculating position size exposes you to unpredictable risk. [Link to Position Size Calculator]
5. Overleveraging
High leverage magnifies both profits and losses. Many blow-ups happen not from bad calls, but from **too much leverage**.
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- “I’ll just recover later” — Losses compound faster than you think.
- “Risk management kills profits” — It actually protects and grows them.
- “I can manage risk without stop-loss” — Human emotion makes this impossible.
Pro Risk Management Tips for Indian Traders
- Risk only 1–2% of your account per trade
- Use hard stop-loss orders, not mental stops
- Adjust position size based on volatility
- Keep a risk-reward ratio of at least 1:2
- Never trade without a written plan
FAQs – Risk Management in Trading
1. What is the 2% rule in trading?
It means you should risk no more than 2% of your total capital on any single trade.
2. How do I calculate position size?
Divide your risk amount by the stop-loss distance in points, then multiply by lot value. [Link to Position Size Calculator]
3. Why is leverage dangerous?
Leverage magnifies both gains and losses, making risk control harder.
4. Should I use trailing stops?
Yes, trailing stops can lock in profits while letting winners run.
5. Can I recover from a blown account?
It’s possible, but it takes time and discipline. Preventing a blow-up is far easier.
Final Thoughts
Most traders lose money not because they can’t predict the market, but because they **can’t control themselves**. Master risk management, and you’ll not only survive — you’ll thrive.
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