What is Trade Risk?
Trade risk refers to the amount of capital you are placing at risk on a position — the potential loss you may incur if the market moves against your trade.
This is typically defined by the stop loss (SL) you set when opening the position.
Note: While SLs are not mandatory, they are strongly recommended. Using a stop loss helps you clearly define your trade risk at entry and remain compliant with our risk parameters.
How Risk is Calculated:
We use the following formula to determine the estimated risk on a trade:
(Entry Price – Stop Loss) × Lot Size × Contract Size
Depending on the trade direction:
For Buy (Long) trades:
Risk = (Entry Price – SL) × Lots × Contract SizeFor Sell (Short) trades:
Risk = (SL – Entry Price) × Lots × Contract Size
If No Stop Loss is Used
Placing a trade without a stop loss does not automatically result in a breach. However, if the trade (or multiple trades on the same instrument) drops into an unrealised loss greater than 50% of your daily drawdown limit, it may be treated as a breach under the One-Sided Risk Exposure rule — regardless of whether the trade is eventually closed in profit.
This is because risk must be controlled and measurable, even if you use soft exits or manual closures.
🔗 Read more: What is the One-Sided Risk Exposure Rule?
Example – Gold (XAUUSD):
Account size: $100,000
Daily drawdown limit: 5% = $5,000
Max allowed risk per trade/idea: 50% of DBDD = $2,500
You place a Buy trade:
Entry: $2,000
Stop Loss: $1,990
Lot size: 1
Contract size: 100
Risk = (2000 – 1990) × 1 × 100 = $1,000 ✅ Within limits
But if you trade without an SL, and the trade reaches an unrealized loss of $2,600, this exceeds your allowed risk — ❌ and can be considered a breach.
Best Practices:
Always calculate your risk at the time of entry, not after the trade is closed.
Use SLs to clearly define your risk and avoid unintentional breaches.
If you’re stacking positions on the same instrument, calculate the total combined risk as a single trade idea.
Monitor your equity during open trades to ensure you remain within your limits.
If you’re ever unsure about how your trade setup aligns with our rules, please reach out — we’re here to support your success.