Forex Risk Management Cheat Sheet

Risk Management Quick Reference

Topic	Rule	Notes
Position Sizing	1–2% risk per trade	Beginners: 0.5–1%. Never exceed 2%.
Stop Loss	Structure / ATR / %	Structure-based often best. Never trade without one.
Risk-Reward	Min 1:1.5, prefer 1:2+	50% wins at 1:2 = profitable.
Correlations	Diversify or adjust size	Avoid multiple highly correlated positions.
Scaling	Clear rules before entry	Scale in on winners only. Scale out at targets.

Core Rules

• Survive first, profit second. Protecting capital is more important than chasing returns.
• Never trade without a stop loss. Every trade needs a defined exit.
• Reduce size in drawdowns. Do not try to recover losses by increasing size.
• Consistency over home runs. Steady 1–2% risk beats occasional big bets.

Position Sizing

• Fixed risk method: Decide risk amount (e.g. 1% of $10k = $100) → Place stop → Calculate lot size so stop hit = $100 loss.
• Formula: Risk amount / (Stop loss in pips × Pip value per lot).
• Use our position size calculator for quick results.

Stop Loss Placement

• Structure – Below swing low (long) or above swing high (short). Often works best.
• ATR-based – 1–2× ATR from entry. Adapts to volatility.
• Percentage – e.g. 1% of account. Simpler but less precise.
• Trailing stop – Move stop with price to lock profits. E.g. breakeven at 1R.

Risk-Reward

• R:R = reward / risk. 20 pip stop, 40 pip target = 1:2.
• 1:1 needs ~55%+ wins to profit. 1:2 needs ~50%. 1:3 needs ~40%.
• Only take trades that meet your minimum R:R. Quality over quantity.

Currency Correlations

• Positive – EUR/USD + GBP/USD move together. Double exposure.
• Negative – EUR/USD + USD/CHF move opposite.
• If pairs are 0.8+ correlated, treat as one position for sizing.

Scaling In and Out

• Scale in – Add to position as price moves in favor. Never add to losers.
• Scale out – Take partial profits at targets (e.g. 50% at 1R, rest at 2R).
• Define rules before entering. No emotional scaling.