💡 Introduction
No strategy is complete without risk management — the shield that protects your capital in losing trades. Candle strategies offer great signals, but losses happen, so managing risk is vital.
This article covers:
- Importance of risk management
- Setting stop-loss based on candles
- Position sizing
- Avoiding overtrading
⚠️ Why Risk Management Matters
- Protects you from catastrophic losses
- Allows consistent trading over time
- Keeps your emotions stable
🛡️ Setting Stop-Loss with Candles
- Place stop-loss just beyond candle wicks or key support/resistance
- For bullish candles near support: stop-loss below candle low
- For bearish candles near resistance: stop-loss above candle high
- Use Average True Range (ATR) to size stops relative to volatility
📏 Position Sizing
- Never risk more than 1-2% of your trading capital on a single trade
- Calculate position size based on distance between entry and stop-loss
🧘 Avoid Overtrading
- Only trade clear, confirmed candle signals
- Avoid revenge trading after losses
- Stick to your plan, even when tempted