Most traders blow up not from bad ideas but from bad sizing. Risk management is the part that keeps you in the game long enough for an edge to play out.
The 1–2% rule
Risk only a small, fixed fraction of your capital per trade — commonly 1–2%. On ₹5,00,000 that's ₹5,000–₹10,000 of defined risk per position. It means a losing streak dents you; it never ends you.
Prefer defined risk
Structures whose maximum loss is known upfront — debit spreads, long options, iron condors — let you size precisely. A naked short can lose far more than planned, which makes honest sizing impossible.
Stops and a daily limit
- Set an exit before you enter — a price or a rupee stop, and honour it.
- Use a daily loss limit (a kill-switch): when hit, stop for the day. It caps tilt-driven revenge trades.
- Cap the number of open positions so one bad session can't cascade.
Survival first. A 50% drawdown needs a 100% gain just to recover. Protecting capital is mathematically more valuable than chasing the next big win.
House of Trading builds these rails in — defined-risk structures, per-trade loss caps and a daily kill-switch — so discipline is the default, not an afterthought.