Protect your capital and trade responsibly. Learn essential risk management techniques that separate successful traders from the 95% who lose money.
In Kenya, where the average monthly salary is around KES 50,000, losing your trading capital can be devastating. Risk management isn't just about preserving money—it's about protecting your family's financial future.
Studies show that 95% of forex traders lose money, but those who succeed have one thing in common: strict risk management rules.
Determine the right trade size based on your account balance and risk tolerance
Always use stop-losses to limit potential losses on every single trade
Spread risk across different currency pairs and trading strategies
This is the most important rule in trading. If you have KES 100,000 in your account, never risk more than KES 2,000 on a single trade. This means even if you have 10 losing trades in a row, you'll only lose 20% of your account.
Even with a 50% win rate, the 2% rule ensures long-term profitability. You can survive 50 consecutive losses and still have 64% of your account left to recover.
Set stop loss at fixed distance (e.g., 30 pips) from entry point
Place stop just beyond key support or resistance levels
Automatically adjusts as trade moves in your favor
Risk-reward ratio compares how much you stand to lose versus how much you can gain. A 1:2 ratio means for every KES 1,000 you risk, you aim to make KES 2,000.
With proper risk-reward ratios, you can be profitable even with a 40% win rate. This is crucial in Kenya where every shilling counts - you need each winning trade to compensate for multiple losses.
Trading psychology is especially important for Kenyan traders who may be using money they can't afford to lose. Emotional decisions lead to account blow-ups.