Advanced risk management in trading: My proven techniques

Learn how professional trader, Wael Makarem, applies advanced risk management in trading—from mindset shifts and tactical tools to lessons from real losses.

Risk management in trading is often reduced to setting stop loss and take profit orders, but in my experience, true mastery comes from a much deeper, more dynamic approach. Over the years, I’ve developed and refined a set of advanced techniques that go far beyond the basics, helping me protect my capital, adapt to market volatility, and maintain discipline—even when emotions run high. In this article, I’ll share my personal framework for managing risk, the tools I rely on, and the mindset shifts that have made the biggest difference in my trading results.

Understanding the true nature of risk in trading 

What does risk really mean to me?

For me, risk in trading is not just about the chance of losing money. It’s about understanding and controlling the full spectrum of possible outcomes before entering any position. Risk is present in every trade, but it’s also an opportunity to shape my results through careful planning and execution. My years of experience have taught me that risk management is not a one-size-fits-all solution; it’s a personalized, evolving process that must adapt to changing markets and personal goals.

Why traditional advice isn’t always enough

Traditional risk management tips and advice often focus on simple stop loss and take profit orders, but in real-world trading, these tools alone are not enough. Markets are dynamic, and volatility can render static stops ineffective. I’ve learned the hard way that relying solely on textbook methods can leave me exposed to unexpected losses, especially during news events or sudden market shifts. That’s why I’ve moved beyond traditional advice, integrating more sophisticated techniques that respond to real-time conditions.

My mindset shift: The key to risk management in trading

Controlling emotions before capital

One of the most powerful lessons I’ve learned is that controlling my emotions is more important than controlling my capital. Fear and greed can lead to impulsive decisions, like moving stops or chasing losses, which undermine even the best strategies. By focusing on psychological discipline—accepting risk before entering a trade and committing to my plan—I’ve been able to make clearer, more objective decisions.

Developing a risk-first trading philosophy

I now approach every trade with a risk-first mindset. Instead of fixating on potential profits, I start by defining my maximum acceptable loss and ensuring my position size reflects that risk. This shift has transformed my trading, making losses manageable and allowing me to stay in the market long enough to benefit from my successful trades.

Tactical tools I use for risk management in trading

My essential tools for effective risk management in trading include:

• Dynamic stop loss systems tailored to market behavior.
• Limit orders based on technical levels and risk-reward.
• Trade manager scripts to visualize and control trading risk.
• Risk-adjusted leverage to protect trading capital.

Dynamic stop losses 

Static stop loss orders are too rigid for my style. I prefer dynamic stop losses—trailing stops that adjust as the market moves in my favor. I also use indicators like the Parabolic SAR (Stop and Reverse) and Supertrend to set trailing stops that follow the trend, protecting profits while allowing room for growth.

Smart use of limit orders

I prefer to set limit orders at predefined, favorable levels based on technical analysis and risk-reward calculations. This helps me lock in profits and avoid emotional decisions when the market moves quickly. I use a trade manager script that allows me to visualize my risk and reward before entering any trade. This also helps me when choosing my position size based on my risk preferences.

Slippage control

Market gaps and slippage can turn a good trade into a bad one. To guard against this, I try to avoid trading during news or keeping trades open over the weekend. I know this could be discouraging sometimes, but it's better to be safe and avoid uncontrollable outcomes.

How I calculate position sizing with precision

(H3) My formula for position sizing

I use a percentage-based approach to position sizing, risking only a small portion of my account on any single trade, typically 1% or 2%. As my account grows, the dollar amount at risk increases, but the percentage stays the same. This method helps me maintain consistent risk exposure and ensures that no single loss can significantly impact my trading progress.

For new traders, this approach can feel slow or unrewarding at first, especially without a solid strategy. But in the long run, staying disciplined and focusing on risk-reward ratios can lead to steady growth. Here's how this helps:

• Keeps losses manageable and consistent.
• Encourages disciplined trade selection.
• Supports long-term capital preservation.
• Builds equity gradually through winning streaks.
• Reduces emotional decision-making.

Managing leverage the right way

Leverage can amplify gains and losses. I use leverage conservatively, only increasing it when my risk management framework allows. Even when tempted by the prospect of bigger profits, I stick to my rules to protect my capital. You will always find opportunities, but what matters is preserving capital to trade these opportunities.

Real-time monitoring: Staying alert and aware

Using alerts as an extension of my intuition

I don't set alerts only for price levels. I also set them for volatility spikes, news releases, and unusual volume. Doing this helps me avoid sudden market moves and adjust my positions as needed.

Staying connected to market sentiment

I track more than just charts—I monitor macroeconomic data, news flow, and market sentiment. This broader perspective helps me anticipate the potential risks involved and reduce exposure when conditions are uncertain.

Lessons from losses: Real-world risk management in trading

My biggest loss and what it taught me

Early in my trading career, I experienced a significant loss by ignoring my stop loss. I kept adding to my position, and hoping the market would turn in my favor. That mistake taught me the importance of discipline and the danger of emotional trading. It is not always easy to abide by risk management rules as the market sometimes excites us, but the level of discipline and professionalism will shape the equity curve.

Lessons I learned through experience:

• Never ignore a predefined stop loss.
• Emotional decisions often lead to larger potential losses.
• Accepting loss is key to long-term growth.
• A strong mindset is just as important as strategy.

The turning point: From reactive to proactive

That loss was the start of a turning point. I developed pre-trade rituals, like defining my risk and reward before entering, and post-trade reviews to analyze every outcome. This proactive approach has made my trading more consistent and less stressful. It is good to note that these steps are vital to achieve success, but you will not see the difference overnight, and will demand a lot of patience.

Continuous improvement: Evolving my risk management strategy 

Using data and journaling to spot risk patterns

I document every trade in a journal, noting my reasoning, risk parameters, and outcomes. Over time, this data reveals patterns and helps me refine my strategy. Since trading is all about probabilities, studying my past performance would help me do better stats and refine my trading decisions.

Learning from other traders (and filtering advice)

It is good to be part of a trading community or to have a small trading group, as the collective efforts will help you on your journey. However,  being selective about what information or advice you absorb is important. I focus on ideas that fit my style and risk tolerance, ignoring those that don’t align with my goals.

Common questions of risk management in trading

Key takeaways

1. Always prioritize risk before reward. Understanding the risks involved in every single trade is essential before considering the expected return. This mindset forms the core of a proper risk management strategy.
2. Use a well-defined trading plan. A clear trading plan should include your entry and exit points, risk limits, and how you will handle a losing position to avoid emotional decision-making and reduce the chance of further losses.
3. Stick to a consistent risk reward ratio. Maintaining a favorable risk reward ratio, such as 1:2 or better, helps ensure your successful trades outweigh your losing ones over time—even if your success rate isn’t high.
4. Protect your trading account at all costs. Every decision should be made with the goal of preserving your trading account. This includes using proper position sizing and avoiding overexposure to higher risk trades.
5. Use stop loss orders to limit downside. A well-placed stop loss helps you control your risk on each trade by automatically exiting when the market moves against you. It prevents a bad trade from becoming a catastrophic one.
6. Adapt your trading strategy to current price movements. Market conditions are dynamic. Your trading strategy should be flexible enough to respond to real-time price movements without deviating from your core risk principles.
7. Understand the financial instruments you trade. Different financial instruments carry different risks and levels of volatility. Always align your trading strategy with the characteristics of the assets you're trading.

Final thoughts: Why risk management in trading is the only true edge

Protecting capital is protecting opportunity. For me, risk management in trading is not just a technique—it’s a risk management strategy that forms the foundation of every trade I take. It's about more than just stop losses or avoiding bad trades. It’s a mindset—one that influences my trading decisions, keeps my emotions in check, and ensures I trade within my risk appetite.

Over time, this disciplined approach has allowed me to adapt to shifting market conditions and steadily grow my account. Losses are inevitable in any trading journey, but the difference lies in how you manage them. With proper risk management, you can limit the damage, preserve your capital, and keep your edge alive for the next opportunity.

If you’re serious about improving your results and mastering your trading risk, the best place to start is with practice. I recommend testing your strategies and risk parameters on the Exness Demo account. It’s a risk-free way to explore new techniques, fine-tune your system, and build the confidence needed to succeed in live markets, without putting your capital at risk.

Start refining your strategy today. The markets will always be there, but your edge comes from how well you manage risk.