The maths of losses
Losses and gains are not symmetrical. A 50% loss is not repaid by a 50% gain, because your capital is already half. The formula: gain needed = loss ÷ (100% − loss).
| Loss | Gain needed to get back to even |
|---|---|
| 10% | 11.1% |
| 20% | 25% |
| 30% | 42.9% |
| 50% | 100% |
| 70% | 233.3% |
| 90% | 900% |
The deeper the loss, the less realistic the road back. That is why the goal of risk management is to keep losses shallow, not to chase big gains.
Risk per trade and position size
Decide first what percentage of capital you are willing to lose on one trade, usually 1 to 2%. Then work the position size backward from the stop-loss distance:
Lot size = (capital × risk percentage) ÷ (stop-loss distance in pips × pip value per lot)
| Capital | 1% risk | Stop-loss | Position size |
|---|---|---|---|
| 500 USD | 5 USD | 20 pips | 0.025 lot (rounded to 0.02) |
| 1,000 USD | 10 USD | 20 pips | 0.05 lot |
| 5,000 USD | 50 USD | 20 pips | 0.25 lot |
The calculation uses a pip value of 10 USD per standard lot, as an illustration. For crypto and indices, replace the pip value with the value per one point of price movement on that instrument.
Risk-reward and win rate
Risk-reward compares what you stake with what you aim for. The bigger the target relative to the risk, the lower the win rate you need to break even.
| Risk-reward | Break-even win rate (before costs) |
|---|---|
| 1:1 | 50% |
| 1:2 | 33.3% |
| 1:3 | 25% |
The table does not count costs. Spread, commission, and swap raise the real break-even win rate, so low costs help directly. A 1:2 ratio is not a guarantee of profit, because a target set too far is also hit less often.
Daily loss limits and drawdown
Drawdown is the drop in equity from its latest peak. A daily loss limit stops you before one bad day becomes a bad week. An example rule: stop trading for the day once losses reach 2 to 3% of capital, or after three losses in a row.
Write the numbers down before you start trading. A limit set while you are losing is almost always loose.
Leverage, margin, and liquidation
On CFDs and futures, the broker or exchange force-closes your position when margin runs short. The threshold differs. According to each broker's page, the stop out at Harmovest is 50%, and at Markets4you it is 20% for Classic accounts and 10% for Cent accounts. According to the Bitget page, CFD liquidation happens at a 50% margin ratio, and commission is not counted when margin is checked.
That means the more leverage you use, the closer price sits to the liquidation point. Leave margin room and do not use all the leverage on offer just because it is available.
Risks specific to crypto futures
Crypto futures have two margin modes. With isolated margin, the loss on one position is limited to the margin allocated to it. With cross margin, your whole balance backs the position, so one bad trade can use up the entire balance.
The crypto market never closes and can move sharply at any time, so stop-losses and low leverage matter more than in a market with closing hours. Fee and liquidation details are on the Crypto Exchange page.
Risk rules at a prop firm
At a prop firm, the daily and total loss limits are conditions of passing. Breaking one means the evaluation or account fails. Check the definition closely: a static drawdown is measured from the starting balance, while a trailing drawdown rises with your highest equity, so your room narrows as you profit.
A personal risk plan that is normally only advice becomes an obligation. The Prop Firms page is still coming soon.
Psychology: stop rules
The worst decisions get made after a losing streak. So set a stop rule that cannot be negotiated: once the daily limit is hit, close the platform and write a journal note. Do not open "one more" position to get it back.
ZenMode (NexusOS, in development) is designed to freeze execution access briefly after a losing streak, but it is not usable yet. Until then, a written rule and a forced pause are the best substitute.
A one-page risk plan
- Risk per trade: what percentage of capital (for example 1%).
- Daily loss limit: what percentage, and what you do once it is hit.
- Weekly or monthly loss limit: when you stop and review.
- Maximum leverage you will use, regardless of what is offered.
- Maximum open positions at one time.
- News releases: your rule when there is high-impact news.
Summary
- Gain needed to recover = loss ÷ (100% − loss). A 50% loss needs a 100% gain.
- Risk 1 to 2% per trade, and work lot size backward from the stop-loss distance.
- A 1:2 risk-reward needs only about a 33% win rate to break even, before costs.
- Set a daily loss limit and stop rule before trading, not while you are losing.
- Watch out for liquidation (CFDs and futures) and prop firm drawdown rules. All of them close positions without waiting for you.
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