Trading Strategy Basics: Risk First, Entry Second
A strategy is a set of rules you can repeat and measure, not a prediction. This page covers the parts that survive contact with a live account — position sizing, stop placement, and the record that tells you whether the rules work. No performance claims and no target returns: those depend on the market and on the trader.
Open FXView Account →A workable strategy is three rules you can repeat: what market condition you trade, how much of the account you risk per trade, and where the stop goes. Size follows from risk and stop distance — with a $2,000 account risking 1%, a 20-pip stop on EUR/USD works out to about 0.10 of a lot. Test the rules on the free demo across 30-50 trades before funding. Most retail investor accounts lose money when trading CFDs, and no rule set removes that.
Building rules you can actually test
- Decide what market condition the rules are for. Trend-following rules aim at markets that keep moving one way and expect many small losses against fewer large wins; range rules aim at markets rotating between levels and expect the opposite shape. Applying trend rules in a range, or the reverse, is the most common reason a 'good' strategy stops working — the market changed, not the rules.
- Size the position from risk, not from conviction. Fix the loss you accept per trade as a percentage of the account — 1% is a common starting point — then work backwards: with a $2,000 account, 1% is $20; a stop 20 pips away on EUR/USD at $0.10 per pip per 0.01 lot means about 0.10 of a lot. The stop distance determines the size, never the other way around.
- Place the stop where the idea is wrong, not where the loss feels tolerable. A stop tucked just under the entry to keep the loss small will be hit by ordinary noise; one placed beyond the level that invalidates the setup gives the trade room and forces the position size down. The margin calculator on this site does the arithmetic for both margin and pip value before the order is placed.
- Leverage is a sizing input, not a strategy. A higher leverage setting frees margin but does not change the loss per pip — it changes how close the account sits to the stop out level. Two accounts with identical positions and different leverage lose exactly the same money on the same move; only one of them survives the drawdown.
- Test on demo with the same rules, size percentages and hours you intend to trade live. FXView's demo runs about $10,000 in virtual funds on MetaTrader 4, MetaTrader 5 and ActTrader — the same execution environment, so spread, swap and slippage are part of the test. A sample of 30-50 trades says far more than a good week.
- Keep a record of every trade: setup, entry, stop, size, exit and the reason. Without it there is no way to tell a losing streak inside a working method from a method that stopped working — and that distinction is the whole job. Most retail investor accounts lose money when trading CFDs; a written process is what makes the risk deliberate rather than accidental.
Two rule sets, two different expectations
| Approach | Suits | Typical shape | Main risk |
|---|---|---|---|
| Trend-following | Markets moving persistently one way | Many small losses, fewer large wins | Long flat periods with repeated stop-outs |
| Range / mean reversion | Markets rotating between levels | Many small wins, occasional large loss | A breakout that does not come back |
| News-driven | Scheduled data releases | Very short holding times | Spread widening and slippage at the release |
| Position (multi-day) | Slow macro moves | Few trades, wide stops | Swap cost accumulating on every rollover |
Frequently asked questions
How much of the account should one trade risk?
A fixed small percentage decided in advance — 1% is a common starting point. Fixing the percentage first is what makes position size a calculation rather than a feeling.
How do I turn a stop-loss into a position size?
Risk in currency divided by stop distance in pips gives pip value, and pip value gives the lot size. With $20 of risk and a 20-pip stop on EUR/USD, that is $1 per pip, or about 0.10 of a lot. The margin calculator on this site does both steps.
Should a strategy be tested on demo first?
Yes, with the same rules, risk percentage and trading hours you intend to use live. The FXView demo runs about $10,000 in virtual funds on the same platforms, so spread, swap and slippage are included in the test.
Why does a strategy stop working?
Most often because the market condition changed — trend rules applied to a range, or the reverse. A written trade log is the only way to separate a normal losing streak from rules that no longer fit the market.