To ensure consistent risk management, all trades must comply with the following rule:
A trade (or group of related trades) must not exceed 2.5% of the account balance in either:
Highest Running Equity Loss – The maximum unrealized loss reached during the trade.
Highest Stop Loss (SL) Level Used – The largest stop loss level set for the trade.
Application of the Rule:
If a trade’s running loss at any point exceeds 2.5% of the account balance, it is considered a breach, even if the trade later becomes profitable. If a trade has an initial Stop Loss greater than 2.5% of the account balance, it does not qualify.
If multiple trades are part of the same trade idea (e.g., same asset/instrument and strategy), their cumulative risk is assessed together.
Example: On a $100,000 account, the maximum allowable risk per trade (or trade idea) is $2,500. If at any point a trade or group of related trades exceed this limit, it violates the risk rule.
By adhering to this rule, traders maintain disciplined risk management and stay within the allowed parameters.