Risk management is not a stop loss placed after you have decided to trade. It is the set of decisions that determines whether a single idea can damage your account or your ability to make the next decision clearly.
The nine questions
Before entry, answer these in writing:
- What is the setup and what would disprove it?
- Where is the stop, and why is it there?
- How much money am I willing to lose if the stop is reached?
- Does position size match that risk amount?
- Is the market liquid enough for this size?
- Is there scheduled news or an event that changes the plan?
- What is the realistic reward relative to the risk?
- How much have I lost today, and what is my pause rule?
- Am I entering from a setup or from urgency?
Make risk a calculation, not a feeling
Use a position size calculator after you define entry and invalidation. Then check the risk-reward ratio against your trading plan. These tools do not create an edge, but they make the risk decision explicit.
Protect the rest of the day
Daily limits are not an admission of failure. They create a boundary when frustration can affect size and frequency. Our guide to setting a daily loss limit explains how to choose a process rule you can actually follow.
Save this checklist in PnL App before a session, then compare the plan with what happened after the trade.
