Every blown trading account dies the same way: position sizes that were too large for the losing streak that eventually arrived. Not "if" — eventually. Every strategy, manual or automated, has losing streaks baked into its statistics. Risk management is the discipline of making sure those streaks are survivable.

The one number that matters

Risk per trade, expressed as a percentage of account equity, is the master dial. At 1% risk per trade, a streak of ten consecutive losses — which happens to good strategies — costs roughly 10% of the account. Painful, recoverable. At 10% risk per trade, the same streak destroys 65% of the account, and the mathematics of recovery turn brutal: a 65% loss requires a 186% gain just to get back to even.

This asymmetry — losses require disproportionate gains to recover — is why professionals obsess over drawdown before they ever discuss returns. An account that avoids deep drawdowns can compound. An account that regularly visits them cannot.

The arithmeticLose 20%, need +25% to recover. Lose 50%, need +100%. Lose 75%, need +300%. Drawdown is not symmetric, and this single fact should shape every sizing decision you make.

What to demand from any automated strategy

  • A hard stop-loss on every position — in the market, not just in the code's intentions.
  • Position sizing tied to account equity, not fixed lots that silently grow riskier as the account shrinks.
  • A daily or weekly loss limit after which the strategy stands down.
  • Explicit, documented behavior for hedging or recovery logic — these can smooth results in normal conditions and concentrate catastrophic risk in abnormal ones. You must know which trade-off you are holding.
  • A published maximum historical drawdown, and your own assumption that the future will exceed it.

Leverage is not the strategy

Retail forex brokers offer leverage of 1:30 to 1:500 and beyond. Leverage determines how much you can lose per unit of price movement — nothing more. A strategy is not "better" at higher leverage; it is simply closer to its own ruin. Treat broker leverage as plumbing, set your risk in percent-of-equity terms, and let position size fall out of the math.

If you remember one lesson from this entire site, make it this one. Everything else — platforms, backtests, brokers, robots — is machinery around the single question of how much you lose when you are wrong.