The set of rules that limit potential losses and control overall trading risk. In automated trading, risk management logic ensures that trades do not violate predefined risk parameters. This can include per-trade risk limits, stop-loss placement, daily loss limits, and maximum drawdown checks. Risk management is “the practice of limiting or reducing risks associated with trading” and is critical to a robust system.

• Definition: Rules to protect capital, such as setting stop-losses, limiting position size, or capping the number of simultaneous trades. Example rules: “never risk more than 2% of equity on a single trade” or “if daily loss exceeds 5%, stop trading.”

• Context: Implemented by calculating risk metrics in code. For example, before sending an order, the EA may compute the prospective loss based on the stop-loss and abort if it exceeds a percentage of account balance. It may also close positions or disable trading if equity falls to a certain level.

• Example Code:

  double riskPercent = 0.02; // 2% per trade
double accountRisk = AccountBalance() * riskPercent;
double stopLossPips = 50;
double pipValue = SymbolInfoDouble(_Symbol, SYMBOL_TRADE_TICK_VALUE);
double lotSize = accountRisk / (stopLossPips * pipValue);
// Place order with lotSize such that if SL is hit, loss ≈ 2% equity
OrderSend(Symbol(), OP_BUY, lotSize, Ask, 5, Ask-stopLossPips*Point, 0, "Risk-managed buy", 0, 0, clrNone);

  // cAlgo example: cap risk to 3% of equity
double equity = Account.Equity;
double maxRisk = equity * 0.03; // 3%
double stopPips = 30;
double pipValue = Symbol.PipValue;
int volume = (int)(maxRisk / (stopPips * pipValue));
ExecuteMarketOrder(TradeType.Buy, SymbolName, volume, "Bot", stopPips, 60);

  // NinjaScript example: stop trading if drawdown exceeds 10%
double initialCash = 100000;
if (Account.GetAccountValue(Cbi.AccountItem.CashValue) < initialCash * 0.90)
{
// set a flag or disable further entries
Skip = true;
}


  These snippets show how the bot calculates trade size and applies stops based on risk. The Corporate Finance Institute defines risk management as “limiting or reducing risks”, highlighting the importance of coding such safeguards.

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