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FX Handbook

Risk Management

Position sizing, stop losses, drawdowns and the maths of staying in the game.

Key terms

  • Stop loss

    A stop loss is an order that closes a position automatically if the price moves against you to a set level. It is designed to limit the loss on a trade, but it does not guarantee the exit price.

  • Take profit

    A take profit is an order that closes a position automatically when the price reaches a set profit target.

  • Trailing stop

    A trailing stop is a stop loss that moves with the price as a trade goes in your favour. It keeps a set distance from the price and does not move back.