Successful traders don't start by asking "How much can I make?" â€- they start with "How much can I afford to lose?" Learn to build strategies around risk management from the ground up.
Every strategy built on SFZ Capital includes configurable risk controls. These aren't optional extras â€- they're fundamental components of every trading bot.
Set a fixed price level where your position is automatically closed. Prevents catastrophic losses on any single trade by capping downside to your predefined tolerance.
A dynamic stop that follows the price upward. If a stock rises from $100 to $120 with a 5% trailing stop, the stop moves to $114. Locks in gains while letting winners run.
Control how much capital each trade uses. Risk a fixed percentage of your portfolio per trade (e.g. 1-2%) so no single position can devastate your account.
Set a maximum portfolio-level loss threshold. If your account drops below this limit, trading is paused automatically to preserve remaining capital.
| Risk Parameter | What It Does | Typical Setting |
|---|---|---|
| Stop-Loss % | Maximum loss per trade before automatic exit | 2-5% below entry |
| Trailing Stop % | Dynamic stop that follows price upward | 3-8% trailing distance |
| Position Size | % of portfolio allocated per trade | 1-5% of total capital |
| Max Open Positions | Limits concurrent exposure | 3-10 positions |
| Max Drawdown | Portfolio-level circuit breaker | 10-20% of account |
| Daily Loss Limit | Stops trading after daily loss threshold | 2-3% of portfolio |
On SFZ Capital, risk management isn't an afterthought. Here's the recommended approach:
Decide what percentage of your capital you're willing to risk per trade and overall. This becomes the foundation of your strategy in the bot creator.
Before defining entry conditions, configure your stop-loss and trailing stop. Your risk parameters should determine position size, not the other way around.
Use the backtesting engine to see maximum drawdown and worst losing streaks. If they exceed your comfort level, tighten risk parameters or reduce position sizes.
No risk management system can prevent all losses. Markets can gap through stop-loss levels during extreme events. Position sizing and stop-losses reduce risk but do not eliminate it. Only trade with capital you can afford to lose.