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Risk Management
Risk ManagementThe overall framework for limiting losses and protecting trading capital. Includes position sizing (how much per trade), stop-losses (automatic exit points), and portfolio-level risk limits (maximum total exposure). The single most important skill for trading survival.
Related Terms
Position Sizing
Determining how many shares or contracts to trade based on account size and risk per trade.
Stop-Loss
An order to exit a position when the price moves against you to a predetermined level.
Risk-Reward Ratio
The ratio of potential loss to potential gain on a trade.
Drawdown
The peak-to-trough decline in an account or portfolio value, typically expressed as a percentage.