Build your risk plan
Set limits and scenarios before making a decision.
Understand exposure
Start with total exposure and the effect of adverse moves. Initial margin is not a sufficient measure of possible loss. Consider related positions too, because different assets may respond together to the same event.
Plan before the trade
Define the scenarios you intend to monitor, the conditions for reviewing your decision and the capital you can put at risk. Include costs and the possibility of execution away from the requested price. A stop order does not eliminate gaps or limited liquidity.
Review the process
Keep a record of assumptions and outcomes. A positive result does not prove that a decision was sound; a loss alone does not explain the process. Use reviews to identify concentration, behavioural changes and missing information.