Writing Your Personal Risk Policy
Combine the course into a one-page set of written rules, with a review routine and a plan for broken rules.
What you will learn
- Which sections a one-page risk policy should contain.
- How to turn percentages into concrete euro limits.
- How often to review the policy and what to check.
- What to do when you break one of your rules.
Explanation
A risk policy is a short written document with the rules you follow in every trade. Writing the rules before trading removes many decisions from stressful moments. A useful policy fits on one page and contains:
- Risk per trade (percent and euros) and how size is calculated.
- Stop rules: every trade has a stop decided before entry; how it is placed (structure or ATR).
- Exit rules: your chosen method from lesson 4.
- Maximum portfolio heat and group limits for correlated trades.
- Leverage limit: a maximum effective leverage below the legal limit.
- Loss limits: daily, weekly, and drawdown levels that reduce size or stop trading.
- Event rules: what you do before high-impact releases and earnings.
- Review cadence: for example, a short weekly review of the journal and a full monthly review of statistics.
- Rule-break procedure.
Review cadence: weekly, check whether every trade followed the rules. Monthly or every 30–50 trades, update your statistics (lesson 9). Change rules only during a review, never during an open trade, and record the date and reason for every change.
When a rule is broken: first, bring the position back within the rules (close it or reduce it). Second, record the break in the journal: what happened, why, and the cost. Third, apply a consequence you defined in advance, such as no new trades for the rest of the day. If breaks repeat, reduce size or pause until the review.
Worked example
Hypothetical example: a policy for an account of €15,000. All figures are examples, not recommendations; fees and taxes are excluded.
| Rule | Setting | In euros |
|---|---|---|
| Risk per trade | 0.75% | €15,000 × 0.0075 = €112.50 |
| Maximum heat | 3% | €450 |
| Group limit | 1.5% | €225 |
| Daily loss limit | 2R | 2 × €112.50 = €225 |
| Weekly loss limit | 4R | €450 |
| Halve size at drawdown of | 6% | €900 (equity €14,100); new risk 0.375% ≈ €56 |
| Stop trading and review at | 12% | €1,800 (equity €13,200) |
| Max effective leverage | 5:1 | Max total notional €75,000 |
| Events | Flat 15 minutes before and after high-impact releases | — |
Common mistake
Practice activity
Write a policy for a hypothetical €6,000 account with these settings: risk 1% per trade, maximum heat 4%, daily loss limit 3R, halve size at an 8% drawdown, stop trading at a 15% drawdown. Calculate every euro amount and the equity levels for the drawdown rules.
Show solution
Risk per trade = €6,000 × 1% = €60. Maximum heat = 4% = €240. Daily limit = 3 × €60 = €180.
Halve size at 8% drawdown = €480 loss → equity €5,520; new risk 0.5% of the starting balance = €30.
Stop trading at 15% = €900 loss → equity €5,100.
Limitations: the settings are examples; choose your own limits based on your finances and record, and remember that this course is education, not a qualification or individual advice.
Key takeaways
- A one-page written policy turns risk ideas into concrete euro limits.
- Include risk per trade, heat, leverage, loss limits, events and review cadence.
- Change rules only during scheduled reviews, with a written reason.
- Have a fixed procedure for broken rules: fix, record, consequence.
Next step
Continue with the course "Markets & Macro" to understand the economic forces and events behind the price moves you now know how to manage.
Self-check
Answer the questions, then check your answers. You can retry as often as you like.
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