What comes to your mind when you think about successful trading? Most traders believe that success in trading is all about finding a perfect trading opportunity and speculate on it. When in fact the correct answer is consistency. You probably already know that in order to trade, the trader has to abide by certain rules. Risk management is also a set of the said rules. Arguably, the most important of all, as those who want to earn money should first learn how to manage their losses correctly.
Risk management is a key concept in trading that all novice traders should understand and learn to apply. Unfortunately, this topic is often overlooked, sometimes even dismissed as unimportant. Nonetheless, more than one trader has gone bankrupt due to his lack of discipline and insufficient risk management.
When expecting a single trade that will change your life for the better you behave like a gambler (which is obviously counterproductive). But in reality, trading has nothing to do with gambling. The sooner you understand this the better. If you find yourself thinking about trading in terms of blind luck you are definitely doing something wrong. Risk management rules are here to bail you out and make your entire trading journey more productive.
The 2% rule
Investing a random amount of money into a deal (just because you think it is a good idea) is very close to gambling. Allocating a thoroughly calculated amount, on the other hand, can pay off in the long-term. It is widely accepted that the optimal amount of money you invest in a single deal should not exceed 2% of your entire capital.

Knowing how to control losses is as important for a successful trader as it is to spot a trend reversal, open a deal in the right direction, etc.
No matter what trading strategy you use, you will occasionally run into a losing streak. This is when risk management rules are especially important. When winning one trade after another, it doesn’t matter whether you have 1% or 50% of your trading capital invested. Actually, you would be better off by allocating as much as possible when success is guaranteed. However, in reality, there is always a chance of failure (which is actually quite high).
You, therefore, may want to find a balance between the potential profit and loss you are quite likely to incur. Some traders settle for 2% of their trading capital per one deal. Why? Because, according to them, 2% is good enough for consistent trading and also gives enough flexibility to survive a losing streak that will sooner or later occur. Let’s use an example to better understand this logic. For example, let’s take a look at a losing streak of only 5 deals and compare what happens when allocating 2% and 10% of the trading capital to a single deal.
# of the deal | 2% | 10% |
0 | 10,000 | 10,000 |
1 | 9,800 | 9,000 |
2 | 9,604 | 8,100 |
3 | 9,411 | 7,290 |
4 | 9,223 | 6,561 |
5 | 9,039 | 5,904 |
As you can see in this example, there is a huge difference between 2% and 10%. When allocating 2% of the capital to a single deal loses might reach only 10% of the initial capital. With 10% at stake in every deal, loses may be over 40% after a series of only 5 unsuccessful deals. Quite a difference! No matter how good you are at your best, at your worst you want to remain as humble and disciplined as possible.
Remember that as a trader, you are not looking for a jackpot. Instead, you should be interested in a series of small wins, each of them getting you closer and closer to your goal.
Fund allocation is not the only risk management rule to follow. Still, it is something to familiarize yourself with and, most importantly, use in your daily trading routine. Just following this simple rule can dramatically increase your chances of improvement.
Start trading
J’aimerais être plus informé sur le trading pour être un svp
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This is a very supportive lesson.
Glad to hear that!
Hell it’s a great lesson full of knowledgeam a begginer kindly help me
Glad you like it! 🙂
Nothing to say but this is an excellent article to a successful trading or an upcoming on
Thanks for taking the time to reach out to us. It really helps us to keep going and delivering the best 🙂
Hi
Hi, how’re you? What can we do for you? 🙂
I needed to read this. Thanks a lot
You’re so welcome 🙂
This is a very important reminders mostly to all beginners in this field!
Thank you for your kind appreciation! 🙂
Thanks
You’re always welcome here
Nice sir ❤️
Thanks!
Now I know thanks a lot for the info.
You’re more than welcome!
Thank you. It’s made me to think about what I’m doing while I m trading.
Thanks for taking out time to read our blog. It really helps us to keep going and delivering the best 🙂
This article is very helpful. Reminds me to be mindful in every trade.
Thanks a lot! We appreciate that 🙂
hmm that good
Hello Dear, thank you so much for your feedback.
Let us know if you have something to add. Good day.
Thanks for ur great support
You’re most welcome! 🙂
I need help guys I lose 75 dollars i want recover my cash
We’re sorry trading turned out to be unprofitable for you. Please note that intuitive trading often leads to unsatisfactory results. That’s why it’s important to analyze the chart and check different trading patterns.
Maybe your trading approach isn’t working, please, consider using a different one. You can also open a free demo account to train.
Than; you for this great article.
You’re most welcome 🙂
thank you so much hope you keep on supporting us small traders to be good trader just like me i really want to learn more strategy on trading so that i can support my family financially like now that we are having a baby trading can help me support my family. again thank you
Thank you for joining! May you be blessed with a long and happy life!
thanks for your support us and i will keep this rules to manage my risk.
thanks again and again.
Thank you so much for the nice words! Your satisfaction is our reward.
Thanks you touched my mistake
You’re always welcome here, Emad 🙂
thanks for your support us and i will keep this rules to manage my risk.
thanks again and again.
Wisdom for us beginners, thanks a lot.
Hello Dear, thank you so much for your feedback.
We try to do our best and to provide you with the right information. Let us know if you have something to add. Good day.
Wish I would have read this lesson earlier before loosing 20 percent of my investment.
Thank you brother
Always welcome Billy, it is never too late 🙂 Wishing you all the best.
If you want to win BIG, this strategy will not work unless you deposit a big amount such as $100k or minimum $20k. There is no point in trading if your aim is not to win BIG.
Hello, that is not true 🙂 It does not depend on how you much deposit / invest, it depends on other factors.
How tu use appa
Hello there! How are you doing? IQ Option is a trading platform where you can start your journey as a trader.
You can learn how to trade on your practice account.
You can find more tutorial videos on our trading page.
Supper powerful advice, floods of thanks.
Hello Dear, thank you so much for your feedback.
We try to do our best and to provide you with the right information. Let us know if you have something to add. Good day.
great advice for a novice like me.
Thanks! We appreciate that 🙂
Hi, I was wondering whether I am allowed to share this blog on my website, this is great content. This and many others.
Thanks sir
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Thank you for the inquiry! We’re checking with the relevant department and will let you know on the update 🙂
Thank you again for the heads up # HappyTrading 😉
Thanks for choosing IQ Option! 🙂
Money management is really important. Thanks for the articles
You’re most welcome 🙂
Hi, I am Marcel I have traded here for long time ago and also best thing is that I doubled or even tripled my capital in like 4 to 5 days, but the interesting thing I lost of my entire balance the next day after that massive results and it happened many many times because of not having plan for risk management.
But after reading this article I set myself a goal of having a plan for risk management of my capital invested and staying in the market as possible as I can.
Thanks for all people who participated in writing this helpful article.
Thanks for taking the time to reach out to us, Marcel. It really helps us to keep going and delivering the best 🙂 Happy trades further on!