You know you should risk only 1% per trade. You understand the math behind proper position sizing. You’ve read all the books about risk management. Yet somehow, you still find yourself breaking these rules “just this once.”
I get it. I’ve been there. Even after blowing multiple accounts and losing over $10,000, I still struggled with risk management. Not because I didn’t understand it, but because understanding isn’t enough.
Let me share something embarrassing. Last year, I was managing a $200,000 funded account. I had my risk management rules clearly written down. Never risk more than 1%. Never hold through high-impact news. Never average down on losing trades.
Then one day, I saw what looked like the perfect setup. Everything aligned. Multiple timeframe confluence, key level, perfect structure. Instead of my usual 1% risk, I convinced myself this trade deserved 3%. After all, with my experience and track record, surely I could handle larger position sizes now?
That one decision wiped out two months of profits in 15 minutes.
The Psychology Behind Our Self-Sabotage
Here’s what makes risk management so tricky. We can intellectually understand its importance while emotionally rejecting it. It’s like knowing exactly how many calories are in a chocolate cake but eating it anyway.
The problem isn’t knowledge. When you’re trading a $10,000 account and risking 1% per trade, you’re only risking $100. Even with a 2R winner, that’s just $200 profit. It’s just a day’s worth of salary. Proper risk management feels like you’re making slow progress.
When you’re scrolling through social media. you see other traders posting insane gains. Your friend tells you that he turned $1,000 into $10,000 in a week trading crypto. Your mind knows these are likely fake or cherry-picked results, but your emotional mind starts whispering: “Maybe just this once…”
The Hidden Cost of “Special” Trades
We all have them. Those trades that feel different. The setup looks so perfect that our normal risk management rules seem too conservative. We tell ourselves this is a “special situation” that deserves special treatment.
I learned this lesson the hard way with prop firm challenges. I would be up 6% on a challenge, nearly at the profit target. Then I’d see a “perfect setup” and increase my risk to “speed things up.” Almost every time, these “special” trades would end up failing the challenge.
What’s worse, even when these larger positions worked out, they reinforced bad habits. Each successful oversized trade became ammunition for my brain to justify breaking rules in the future.
The Compound Effect of Risk Management Violations
The real danger isn’t just the immediate loss from one oversized trade. It’s the psychological damage that comes from breaking your own rules. Each time you violate your risk management rules and survive, you reinforce the behavior. This is even worse when you violate your rules and profit from the market. You will think that you’re invincible.
Think about your last few trades. How many times did you do these?
Each of these decisions might seem small at the moment. But they create a compound effect that eventually leads to huge losses.
The Professional’s Reality
Want to know what real professional trading looks like? It’s mind-numbingly systematic. I now manage multiple six-figure funded accounts, and my risk management is completely automated.
Before each trading day, I calculate my maximum position size based on 1% risk. I set up my position calculator with my account size. I write down my maximum loss for the day.
During trading, I input my stop loss distance into my calculator. I take the position size it gives me. No exceptions I set my orders and walk away
This isn’t exciting. It’s not flexible. It doesn’t allow for “special situations.” But it works.
Building Systems Instead of Relying on Discipline
The solution to risk management isn’t more knowledge or better discipline. It’s building systems that make it impossible to break your rules.
After losing enough money, I finally created a system that works:
First, I removed the trading app from my phone. This prevents me from making unnecessary trades during my non-trading hours. It is also difficult to trade using a phone as I do not have the tools needed for my analysis.
Second, I use a position size calculator. It automatically calculates my maximum position size based on stop loss distance with my account size.
Third, I track every risk management violation in a journal. This forces me to confront my mistakes instead of ignoring them.
The Reality of Recovery
Let’s talk about something most traders don’t want to face. The mathematics of recovery.
A 20% loss requires a 25% gain to break even
A 30% loss requires a 43% gain to break even
A 50% loss requires a 100% gain to break even
But knowing these numbers isn’t enough. You need to experience first hand the pain of trying to recover from a large drawdown. Only then, will you truly understand why risk management matters. I’m sure you have experienced it one way or another. Wins and losses are not made equally.
I remember sitting at my desk, staring at a 40% drawdown in my account. I was entering all sorts of entries on my entry time frame, without considering the context of the higher time frames. I needed a 67% return just to break even. The feeling of wanting to break even led me to take even bigger risks, trying to recover faster. Instead, I dug myself into an even deeper hole and eventually lost my account.
The Path to Consistent Risk Management
The hardest part about proper risk management isn’t understanding what to do. It’s being satisfied with the results when you do it correctly.
When you’re risking 1% per trade, a good month might only yield 5–10% returns. This feels painfully slow compared to the potential returns of larger position sizes. But here’s what I’ve learned: those “slow” months compound into significant returns over time, while aggressive trading eventually leads to blown accounts or even giving up on trading forever.
Taking Action: Building Your Risk Management Framework
I know it’s not easy to adhere to your risk management rules. You know this skill is essential for your growth in your trading career. If you’re still struggling with risk management, here’s what you need to do:
First, accept that your current approach isn’t working. If you’re consistently breaking your rules, you need a complete system overhaul, not just better discipline.
Second, automate everything you can. Use position calculators, set up your orders in advance, remove the ability to trade from your phone.
Third, create accountability. Share your trades with a mentor or trading community before entering them. Make it embarrassing to break your rules.
The Choice Ahead
You already know proper risk management is crucial. The question is: Are you ready to build systems that force you to trade properly?
This means accepting that: Your returns might look “small” compared to aggressive traders. You’ll have to watch others take risks you “know” would work. Your account will grow slower than you’d like. Your trading will become boring and systematic
Want to learn how to build these systems and finally master risk management? My newsletter focuses on creating frameworks that make proper risk management automatic. No relying on discipline, no room for “special” trades, just systematic execution.
The market doesn’t care about your knowledge. It only cares about your actions.
I get it. I’ve been there. Even after blowing multiple accounts and losing over $10,000, I still struggled with risk management. Not because I didn’t understand it, but because understanding isn’t enough.
Let me share something embarrassing. Last year, I was managing a $200,000 funded account. I had my risk management rules clearly written down. Never risk more than 1%. Never hold through high-impact news. Never average down on losing trades.
Then one day, I saw what looked like the perfect setup. Everything aligned. Multiple timeframe confluence, key level, perfect structure. Instead of my usual 1% risk, I convinced myself this trade deserved 3%. After all, with my experience and track record, surely I could handle larger position sizes now?
That one decision wiped out two months of profits in 15 minutes.
The Psychology Behind Our Self-Sabotage
Here’s what makes risk management so tricky. We can intellectually understand its importance while emotionally rejecting it. It’s like knowing exactly how many calories are in a chocolate cake but eating it anyway.
The problem isn’t knowledge. When you’re trading a $10,000 account and risking 1% per trade, you’re only risking $100. Even with a 2R winner, that’s just $200 profit. It’s just a day’s worth of salary. Proper risk management feels like you’re making slow progress.
When you’re scrolling through social media. you see other traders posting insane gains. Your friend tells you that he turned $1,000 into $10,000 in a week trading crypto. Your mind knows these are likely fake or cherry-picked results, but your emotional mind starts whispering: “Maybe just this once…”
The Hidden Cost of “Special” Trades
We all have them. Those trades that feel different. The setup looks so perfect that our normal risk management rules seem too conservative. We tell ourselves this is a “special situation” that deserves special treatment.
I learned this lesson the hard way with prop firm challenges. I would be up 6% on a challenge, nearly at the profit target. Then I’d see a “perfect setup” and increase my risk to “speed things up.” Almost every time, these “special” trades would end up failing the challenge.
What’s worse, even when these larger positions worked out, they reinforced bad habits. Each successful oversized trade became ammunition for my brain to justify breaking rules in the future.
The Compound Effect of Risk Management Violations
The real danger isn’t just the immediate loss from one oversized trade. It’s the psychological damage that comes from breaking your own rules. Each time you violate your risk management rules and survive, you reinforce the behavior. This is even worse when you violate your rules and profit from the market. You will think that you’re invincible.
Think about your last few trades. How many times did you do these?
- Move your stop loss to “give the trade room”?
- Add to a losing position because the price looked “even better”?
- Increase your position size because you were sure about the setup?
Each of these decisions might seem small at the moment. But they create a compound effect that eventually leads to huge losses.
The Professional’s Reality
Want to know what real professional trading looks like? It’s mind-numbingly systematic. I now manage multiple six-figure funded accounts, and my risk management is completely automated.
Before each trading day, I calculate my maximum position size based on 1% risk. I set up my position calculator with my account size. I write down my maximum loss for the day.
During trading, I input my stop loss distance into my calculator. I take the position size it gives me. No exceptions I set my orders and walk away
This isn’t exciting. It’s not flexible. It doesn’t allow for “special situations.” But it works.
Building Systems Instead of Relying on Discipline
The solution to risk management isn’t more knowledge or better discipline. It’s building systems that make it impossible to break your rules.
After losing enough money, I finally created a system that works:
First, I removed the trading app from my phone. This prevents me from making unnecessary trades during my non-trading hours. It is also difficult to trade using a phone as I do not have the tools needed for my analysis.
Second, I use a position size calculator. It automatically calculates my maximum position size based on stop loss distance with my account size.
Third, I track every risk management violation in a journal. This forces me to confront my mistakes instead of ignoring them.
The Reality of Recovery
Let’s talk about something most traders don’t want to face. The mathematics of recovery.
A 20% loss requires a 25% gain to break even
A 30% loss requires a 43% gain to break even
A 50% loss requires a 100% gain to break even
But knowing these numbers isn’t enough. You need to experience first hand the pain of trying to recover from a large drawdown. Only then, will you truly understand why risk management matters. I’m sure you have experienced it one way or another. Wins and losses are not made equally.
I remember sitting at my desk, staring at a 40% drawdown in my account. I was entering all sorts of entries on my entry time frame, without considering the context of the higher time frames. I needed a 67% return just to break even. The feeling of wanting to break even led me to take even bigger risks, trying to recover faster. Instead, I dug myself into an even deeper hole and eventually lost my account.
The Path to Consistent Risk Management
The hardest part about proper risk management isn’t understanding what to do. It’s being satisfied with the results when you do it correctly.
When you’re risking 1% per trade, a good month might only yield 5–10% returns. This feels painfully slow compared to the potential returns of larger position sizes. But here’s what I’ve learned: those “slow” months compound into significant returns over time, while aggressive trading eventually leads to blown accounts or even giving up on trading forever.
Taking Action: Building Your Risk Management Framework
I know it’s not easy to adhere to your risk management rules. You know this skill is essential for your growth in your trading career. If you’re still struggling with risk management, here’s what you need to do:
First, accept that your current approach isn’t working. If you’re consistently breaking your rules, you need a complete system overhaul, not just better discipline.
Second, automate everything you can. Use position calculators, set up your orders in advance, remove the ability to trade from your phone.
Third, create accountability. Share your trades with a mentor or trading community before entering them. Make it embarrassing to break your rules.
The Choice Ahead
You already know proper risk management is crucial. The question is: Are you ready to build systems that force you to trade properly?
This means accepting that: Your returns might look “small” compared to aggressive traders. You’ll have to watch others take risks you “know” would work. Your account will grow slower than you’d like. Your trading will become boring and systematic
Want to learn how to build these systems and finally master risk management? My newsletter focuses on creating frameworks that make proper risk management automatic. No relying on discipline, no room for “special” trades, just systematic execution.
The market doesn’t care about your knowledge. It only cares about your actions.
Prop Firm Funded Trader
Find out more about me here: linktr.ee/keeleytan
Find out more about me here: linktr.ee/keeleytan
Related publications
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
Prop Firm Funded Trader
Find out more about me here: linktr.ee/keeleytan
Find out more about me here: linktr.ee/keeleytan
Related publications
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.