Besides what already was posted.
There are a lot of threads here, which bother this issue, especially money-management in detail.
Most of the traders think in terms of profits and always assume a risk reward of 1:1/2:1 or whatever.
But keep in mind after entering an order, nobody knows, how much profit any trade will generate or if the trade will move into loss.
That does not refer to the hit rate or applied strategies at all.
We know, that a hit rate < 50% can also be profitable, concerning and applying Order- and RMM-management.
What we can do and know with certainty, we can only calculate and define the loss, refering what we will risk at individual limits, concerning portfolio and account, as long we remain in a profitable and secure account-area, so we can deal with losses, even with multiple orders, without burning or endanger the account.
Unexperienced traders are mainly focused on setups to predict market/price -movements, disregarding risk- and money-management. It should be vice versa.
Newbies ask in almost every thread, how to place and use stop-loss?
It is worst of time, to talk to demo-traders in that way.
Ancient and successfully traders, like e.g. “Jesse Livermoore”,
he had apply a simple formula during his starting career in bucket shops.
He closed an order instantly, when his margin/invest of an order was hit in loss.
This was his individual risk-management.
On the other side, he protected any order in profit by SL and trailing, with scaling in and out, if the position did move into profit.
This is an example of the common expression, cut losses short and let winners run.
Order- and money-mangement provides a lot of possibilities, if we are familiar with price-action. We can scale in or out (e.g. by partial profit or hedging, OCO-Orders).
It´s traders live, that not every order will move into profit.
Ask yourself, if you are prepared to lose money and where are the limits?
Did you protect and remain your account in a position to compensate losses (even in worst cases)?
Again, don´t think in terms of profit.
Be aware of risk and losses and the issue of using stop-losses will be clarified and solved by itself, considering the account.
Only few thouhgts in generell.
Trade well my friends
Over60