Risk management sets how much a single losing trade can cost. For a beginner, that number is worth deciding before the first trade. This article looks at the risk management errors described in two Singapore-focused pages: a guide from SIAS, the Singapore investor-education body, and an article from Feed Yes aimed at new traders in Singapore.

The article covers a short list of mistakes. Each section explains what the sources say and gives one practical habit that counters it. A checklist at the end gathers those habits in one place. Treat everything below as general education, not a recommendation to trade any product or asset.

Position size without a plan

SIAS lists insufficient risk management among its trading mistakes. Its method for position size is the maximum loss divided by the selected stop-loss size. Put simply, a trader first decides the largest amount of money they are willing to lose on a single trade, then works out how large the position can be given the gap between the entry price and the stop-loss price.

The method ties two decisions together: how much to lose and how large to go. SIAS notes that a conservative approach suggests risking only 2% of trading capital per trade. The figure is a suggestion, not a rule.

A practical habit is to write the maximum loss in dollars before entering a trade, then divide that figure by the distance to the stop. Writing the number down first gives the sizing decision a fixed starting point. A student who wants to practise this arithmetic can look at the Collin Seow risk calculator. The page describes a risk management calculator for stock traders, and it lists account balance, entry price, stop loss, take profit and risk percentage as its inputs. It can be a helpful starting point for practising the position-size arithmetic, and it is worth a look for a structured approach.

No stop loss on every trade

Feed Yes lists not putting a stop loss on every trade among its mistakes. A stop loss is an order that closes a position at a chosen price, which limits how far a trade can move against the trader before it is closed. Without one on a given trade, the exit point is left open.

SIAS suggests placing stop losses near support levels and take-profit orders near resistance levels. Support and resistance are price levels that the source refers to when placing these orders. These are placement suggestions in the source, not promises about where a price will turn.

Decide the exit point before entering, and record it alongside the trade. A written exit point is something a trader can check against during a trade. Recording it also makes later review possible, since the original plan can be compared with what happened.

Holding losing positions

Feed Yes describes traders holding positions in the hope of larger returns, rather than cutting a loss. The wording points to a pattern in which a losing position stays open because the trader hopes it will recover. Keeping a losing position open is a decision in its own right, and the exit point set before entry is the place where that decision should already have been made.

Write the exit rule in advance, then review it on a fixed schedule rather than in the middle of a trade. The rule is easier to check when it is written in terms such as a price level or a dollar amount, rather than a general feeling about the trade. A review done between trades gives the rule a fresh look.

Leverage without understanding amplified losses

Leverage means controlling a position that is larger than the cash put into it. Feed Yes is about CFD trading, which it describes as a form of derivative trading, and it lists not understanding leverage among its mistakes. The same source points to extreme leverage ratios used without an understanding of amplified losses.

The word amplified is the key idea. When a position is larger than the cash behind it, a move against that position can produce a loss bigger than the amount put in. A loss on a leveraged position can therefore be larger than the amount a trader had in mind when opening it.

SIAS warns against excessive leverage and recommends a limit of 3x leverage for conservative investors. That figure is offered as a suggestion, not a regulation, and the article does not present it as a legal limit.

Before using any leveraged product, write down in dollars what a move against the position would cost, and confirm that the figure is acceptable.

No written strategy or record

SIAS lists a lack of a cohesive strategy as a mistake. It describes the missing pieces as rules for buying and selling, position sizing, timeframe, product, and whether a trade is long or short. A strategy that covers only some of these leaves the rest to be decided one trade at a time. A written strategy also gives a trader something to compare each trade against later.

SIAS also recommends keeping a record of profit, loss and win-loss ratios. It links that record to separating skill from chance wins. A record gives a trader something to examine over several trades rather than a memory of the last result.

Keep a trading diary that records profit, loss and the reason for each trade. Writing the reason down lets a trader see whether the strategy was followed or whether a trade was made for some other reason.

Capital and risk limits set too late

Feed Yes lists not having enough money to start with and not setting appropriate risk management parameters. Both points concern what a trader has in place before any trade is placed. Money set aside for trading is the cushion that absorbs losses, and a risk parameter is the written rule that says how much of that cushion one trade may use.

A risk limit belongs in the plan from the start, before any result is known.

Set the per-trade risk limit before opening an account, and keep trading money separate from essential savings so that a bad trade does not reach money needed for daily life. For a practical approach to budgeting, see building a workable budget.

What these sources do not settle

The SIAS page is dated 2015, and the Feed Yes page is dated 2022. Advice written in those years may not match current markets, so a reader should check current information before acting on any point here.

The Feed Yes page is also CFD-specific. Its points on stop losses, holding losing positions and leverage are written about that product, and they may not carry over unchanged to shares, ETFs or crypto.

No current Singapore rule was verified for this article. Nothing here describes what the law requires of any trader. The 2% and 3x figures come from SIAS and are suggestions, not rules.

The two named pages are the only sources used here. The habits are general suggestions added for readers, not quotations from those pages, and none has been checked against a current source.

Checklist and closing note

• Write the maximum loss in dollars before entering, and divide it by the distance to the stop.
• Decide the stop-loss level before entry and record it with the trade.
• Write the exit rule in advance and review it on a fixed schedule.
• Work out what a move against a leveraged position would cost before opening it.
• Keep a written strategy and a trading diary with profit, loss and the reason for each trade.
• Set the per-trade risk limit before opening an account, and keep trading money separate from essential savings.

Do not treat any figure in this article as a target to reach. This is general education, not financial advice.