Risk Comes Before Reward

Spot on. Evaluating downside before profit is the absolute foundation of risk management and position sizing. In trading, you calculate your risk-to-reward ratio and maximum allowable loss per trade before entering, ensuring you never risk more than a small, predetermined percentage of your capital.

In prop firm trading, this mindset is even more critical. Respecting daily loss limits and overall drawdown rules dictates your longevity far more than chasing big wins. Always check the fine print on these metrics before starting an evaluation.

How do you typically calculate your downside risk on a new setup? Feel free to share your approach below!