Risk per trade

I see so many people talking about risk as a percentage of their account size, but then they associate that percentage with the position size they take, rather than the loss incurred if the position hits their stop loss.

I use my desired risk per trade as a way to calculate where to set my stop and to determine ideal position size, e.g. the larger my lot size, the closer I have to place my stop to my entry to maintain the desired risk per trade. I see other people talking about risk like it’s a fixed price though. For example, with an account of $10,000, risking 1% per trade, they place a $100 position and call it risk management, then put their stop in Narnia and wonder why they are blowing accounts.

Use a calculator to determine the value of a pip for your desired lot size, and multiply that pip value by the distance to your stop loss to calculate risk. You may be over or even under sizing your trades, risking more than intended or leaving money on the table! Set your stop according to your trading plan and desired risk per trade, keeping in mind average volatility of the pair on the timeframe you are trading.