Risk Management in Trading - What's your style?

A famous quote by Carl Richards about it goes as follows ”Risk is what’s left over after you think you’ve thought of everything”.

Battle-tested traders will tell you that eliminating the risk completely is an impossible task. That’s why the primary purpose of risk management is to protect your trading capital by all means necessary.

We have covered some most used strategies here - Common Risk Management Strategies in Trading

Which strategy do you use? Let’s discuss :point_down:

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Trading capital - Trading is like doing a business. Capital deployed is risk capital. For me it is a sum of money which is not kept for some urgent emergency immediate or future use. Raising debt and using it as risk capital is also not something I do unless I am confident I can pay it back from other sources if the trading account blows out.

Overnight index positions - only long index options where max risk is limited to premium paid. Also the open position is typically not more than 5% of my overall risk capital.

Overnight commodity positions - I hold futures only because commodity options doesn’t have sufficient liquidity to minimise slippage risk. Theoretically the overnight risk is huge and am hoping to hedge it with options or do pure long options once liquidity picks up.

Intraday equity positions - price based stops and per trade loss is typically not more than 5% of my overall risk capital. Automated strategies auto exits at stop price. For manual strategies I place stops in system and don’t keep mental stops.