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Risk & Money Management

How to Keep a Risk Log

A risk log is one line per trade, written before the trade is placed, recording the size, the distance to the stop, the money at the stop, that money as a share of the account, and the heat across every open trade, so that how the account was risked can be read later rather than remembered. This paper shows you a page of the log in example figures; the idea as the chart at the foot of a hospital bed; the log drawn as a line of twenty trades against the rule; the month's three readings, the average share, the largest and the count over the rule; and the History columns on your platform the log is built from, and the two things they cannot record.

Difficulty
Advanced
Reading time
5 min
Pages
8
Reviewed by
Saman Rahbar

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A page of the log

A risk log is one line per trade, written before the trade is placed. Each line has the time, the symbol, the size, the distance to the stop, what that comes to in money at the stop, that money as a share of the account, and the heat, the share of the account at risk across every open trade at that moment. In the four example lines the third is the one the log exists for: a 0.60-lot trade with a 40-pip stop, 240 dollars, 2.4 per cent where the rule says one, written down before the order went in. The platform records what each trade lost, afterwards. The log records what each one could have, before.

The chart at the foot of the bed

Picture the chart at the foot of a hospital bed. Every reading is written on it when it is taken, by whoever took it, so that the next person on shift can see what was measured and when without asking anyone. A risk log is that chart. The reading is the share of the account at the stop, taken at the moment the trade is placed; the line through the readings is the account's history of exposure; and the next person on shift is the same trader a week later, who does not remember and does not have to. The reading that was high is on the chart for good, in the hand that took it.

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