## Lecture 4: Risk Management in Trading 📊💰#ROBO
In trading, making profit is important, but protecting your money is even more important. Many beginners focus only on finding the perfect strategy, but professional traders focus on risk management. Risk management means controlling how much money you can lose in a single trade so that one mistake does not destroy your whole account. A common rule traders follow is the 1–2% rule, meaning they risk only 1–2% of their total balance on a single trade. For example, if you have $100 in your trading account, you should risk only $1–$2 per trade. This helps traders survive losing streaks and stay in the market longer.
One of the most important tools for risk management is the Stop Loss. A stop loss automatically closes your trade when the price reaches a certain level, preventing large losses. Traders also use a Take Profit level, which closes the trade when a target profit is reached. Another key concept is the Risk-to-Reward Ratio. Many successful traders aim for at least 1:2, meaning they risk $1 to potentially gain $2. Even if they lose some trades, they can still remain profitable over time. By combining discipline, stop loss, and proper position sizing, traders can control their risk and trade more professionally.
### Simple Risk-to-Reward Example
```
Entry Price: 1.2000
Stop Loss: 1.1980 (Risk = 20 pips)
Take Profit: 1.2040 (Reward = 40 pips)
Risk : Reward = 1 : 2
```
### Summary 🧠
* Never risk all your money on one trade
Use *Stop Loss and Take Profit**
Follow the *1–2% risk rule**
Aim for a *good risk-to-reward ratio**
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