Risk Management Guide
Effective risk management preserves capital and keeps you in the game.
1. Position Sizing
Risk only a small, predetermined fraction of your account on each trade (e.g., 1–2%).
2. Stop Losses
Define exit levels before entering a trade to cap downside.
3. Diversification
Avoid concentration by spreading trades across tickers, sectors and strategies.
4. Time Decay Awareness
Option value erodes daily; monitor theta and avoid holding long premium into rapid decay.
Common Mistakes
- Over-leveraging with margin.
- Ignoring implied volatility shifts.
- Letting losers run and cutting winners short.
- Trading without a written plan.
Risk Management Tips
- Use alerts to stay disciplined.
- Keep a trading journal to review decisions.
- Size positions based on delta-adjusted exposure.