How can I manage risk when trading Stocks, FX and Commodities?

No matter whether you trade stocks, forex, or commodities, managing risk effectively is crucial. Below is a general walkthrough on how some traders apply what's known as the 2% rule—a commonly used risk management guideline. This content is for educational purposes only and does not constitute financial advice.

‍

What is the 2% Rule?
The 2% rule is a general risk management approach where traders aim to limit their potential loss on any single trade to no more than 2% of their total account value.

For example: If your account balance is $100,000, the maximum risk per trade would be $2,000.

This guideline is widely used to potentially reduce the impact of losses. This is a general principle and not a recommendation.

‍

How to Apply the 2% Rule with a Stop Loss:

1. Determine Your Risk Tolerance: Decide how much of your account you're willing to risk on the one trade.

‍

2. Click on the 'Buy', 'Bid' or the 'trade' option, within your desired instrument. This will open a trade ticket.

3. From the trade ticket, you can choose the trade type (buy or sell) and enter the amount you wish to trade.

4. After you have entered the desired trade type and amount, click 'Add take profit/ stop loss'

5.click on 'Take profit' or 'Stop loss' to choose your Type and Unit.

‍

6. Add a Stop Loss:

-Choose a stop loss level that limits your potential loss to your risk tolerance.

-For example, if you’re risking $2,000 on a $100,000 account, set the stop loss so that if triggered, your loss won’t exceed $2,000.

- Review Currency Settings:

-Make sure the stop loss is calculated in your account’s base currency (e.g., USD or AUD).

Using Margin - If using margin, ensure your available balance supports the position, keeping the 2% rule in mind.

‍

7. Place Your Order:Click "Place Order" if you want to place the order and check for a confirmation notification once processed.

8. Manage Your Trade: You can cancel or modify the order in the “Positions” tab if needed.

Important Notes:

• Stop Losses Are Not Guaranteed: In highly volatile markets or during price gaps, your stop loss may be triggered at a worse price than expected.
• Adjust for Your Risk Profile: The 2% rule is a general guideline. More conservative traders may choose to risk only 0.1 - 1%.
• This Is Not Trading Advice: Always consider your own financial situation and trading goals before making decisions.

‍