Analysis decides what you buy; risk management decides how long you stay in the market. That's what separates those who last from those who exit early. Here are the practical basics.

1. Risk per trade

Set a fixed percentage of your capital to risk on a single trade (commonly 1%–2%). This ensures a losing streak won't wreck the portfolio. Details in the 1% rule.

2. Position sizing

The formula: shares = (capital × risk %) ÷ (entry − stop-loss). This keeps your maximum loss fixed regardless of the stock's price — more important than the stock pick itself.

3. Stop-loss

Place the stop at a logical technical level (below support or a demand zone), not a random number. And never widen it after entering — that's the most common mistake that turns a small loss into a big one.

4. Reward-to-risk ratio (R:R)

Before entering, compare the distance to the target with the distance to the stop. A 1:2 ratio means risking one pound to make two. With a good ratio, you can be profitable even if only half your trades work.

5. Diversification

Don't put all your capital in one stock or sector. Spread across different sectors to reduce the impact of any sudden event on a company or sector.

6. Controlling emotions

Fear and greed break the plan. Stick to your pre-written rules. Read trading psychology.

Bottom line

Risk management isn't optional — it's a survival condition. Define your risk, size your position, honour your stop, and diversify. The EGX AI Analyzer computes the appropriate position size and stop-loss automatically with every signal.

This content is educational and not investment advice.