Risk management is the backbone of successful trading. The primary goal of any trader should always be to protect their capital, ensuring long-term survival in the market. This involves consistently using stop-losses to limit potential losses, setting position sizes appropriately based on your account size, and not risking more than a small percentage—typically 1-2%—of your total capital on any single trade. Effective risk management allows you to weather periods of loss without depleting your account, giving you the opportunity to capitalize on profitable trades when the market conditions are favorable. Without a solid risk management plan, even a few bad trades could severely impact your trading capital and overall success.

By prioritizing risk management, traders maintain control over their outcomes, reduce the emotional strain associated with trading, and ensure that they are positioned for steady growth rather than large, unpredictable losses.

. Why use a trading journal: A trading journal is a powerful tool for monitoring whether you are consistently adhering to your risk management rules. By documenting each trade's stop-loss level, position size, and percentage of capital at risk, your journal helps you assess whether you are sticking to your predefined risk limits. If you notice that your losses are larger than anticipated or that you are not consistently following your risk management strategy, your journal will provide the insights needed to adjust your approach. This ongoing evaluation helps you refine your risk management practices, ensuring that you are effectively minimizing risk and protecting your capital for long-term trading success.

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