- No Matter Where You Place Your Stop-Loss, Always Be Consistent with Your Risk Per Trade
Remember this: Regardless of where you place your stop-loss, whether it’s 10 pips away or 100 pips away, your risk should always remain the same.
You can’t say things like, “This is going to be a winner, I’m going to risk 3%.” “I’m not too confident with this other trade, so I’ll risk 1%.” No, it doesn’t work this way.
Once you decide on your risk per trade, such as 1%, you must risk 1% for every trade.
- Always Determine Your Stop-Loss Before Calculating the Number of Lots to Trade
Depending on the strategy and the specific candlestick pattern of the trade, you place your stop-loss at different distances (usually below the previous low of the candle).
So you must always determine your stop-loss first, then calculate the number of lots to trade to keep your risk consistent.
- The Number of Lots to Trade Is Inversely Proportionate to Your Stop-Loss
The farther your stop-loss, the smaller the number of lots that you trade. The nearer the stop-loss, the greater the number of lots that you trade, with your risk staying constant.