In the Forex market, your capital is your ammunition. Once you run out of it, the game is over. While many beginners spend months looking for the perfect entry signal, professionals spend that time perfecting their exit strategy. Success in trading isn't about how much you make on your best day; it’s about how little you lose on your worst.

1. The Power of Position Sizing (The 1% Rule)

The most common mistake is over-leveraging. To ensure long-term survival, you should never risk more than 1% to 2% of your total account balance on a single trade.

• Why it works: Even if you hit a "losing streak" of 10 trades in a row, you still have approximately 90% of your capital left to recover.
• The Math: If your account is $5,000, a 1% risk means you only lose $50 if the trade hits your stop-loss.

2. Mastering the Risk-to-Reward Ratio (RRR)

A high win rate is a myth. You can be right only 40% of the time and still be highly profitable if your Risk-to-Reward Ratio is correct.

• Aim for a minimum of 1:2. This means for every $1 you risk, you aim to make $2.
• The Result: With a 1:2 ratio, you only need to win 34% of your trades to break even. This takes the immense pressure off "being right" and puts the focus on "being profitable."

3. The Non-Negotiable Stop-Loss

Trading without a stop-loss is like driving a car without brakes. A stop-loss is a predetermined price level where your trade automatically closes to prevent further damage.

• The Rule: Set your stop-loss before you enter the trade.
• Avoid "Mental Stop-Losses": The market moves faster than human emotion. By the time you decide to close a losing trade manually, the damage is often already done.

Conclusion

‍The goal of a professional trader is to stay in the game long enough for the law of averages to work in their favor. By applying strict position sizing, maintaining a healthy RRR, and respecting every stop-loss, you move from the "90% who lose" to the "10% who win."

‍