> For the complete documentation index, see [llms.txt](https://guida-2.gitbook.io/guida-docs/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://guida-2.gitbook.io/guida-docs/core-concepts/risk-management.md). # Risk Management If there's one discipline that separates investors who last from those who blow up, it's **risk management**. Strategies come and go; the ability to survive your mistakes is what keeps you in the game long enough to win. This page explains the principles, and the tools Guida gives you to enforce them. ## The core idea Risk management is not about avoiding losses — losses are unavoidable. It's about **controlling the size of your losses** so that no single trade, and no single bad stretch, can take you out of the game. A trader who wins often but occasionally loses catastrophically will eventually be ruined. A trader who caps every loss can survive almost anything. > **The first rule is survival.** You can't compound returns from a portfolio that's been wiped out. ## The tools Guida gives you Every one of these is something you set, and that Guida then enforces automatically and without emotion. ### Stop-loss A **stop-loss** automatically exits a position once it falls to a level you've set. It's your circuit breaker: it turns an open-ended, potentially ruinous loss into a small, defined, survivable one. Every position should have one. ### Take-profit A **take-profit** automatically secures gains at a target level. It solves a very human problem: watching a winning trade turn into a loss because you got greedy. Take-profits let you lock in success on your terms. ### Position sizing **Position sizing** governs how much you put into any single trade. The classic discipline is never to risk more than a small percentage of your portfolio on one position — so that being wrong is an inconvenience, not a catastrophe. ### Maximum spend A **maximum spend** caps the total capital a strategy can ever commit. It's the hard ceiling that keeps an aggressive strategy from quietly taking over your whole portfolio. ### Expiry An **expiry** automatically winds a strategy down after a set period — useful for strategies designed around a specific window or thesis, so they don't outlive their logic. ## Principles worth internalizing * **Define your exit before you enter.** Decide what you'll do if you're wrong *before* emotion is involved. Guida lets you encode that decision as a rule. * **Size so that no single loss hurts too much.** Diversification and modest position sizes are unglamorous and enormously effective. * **Consistency beats intensity.** Small, controlled risks taken repeatedly compound. Big swings, even winning ones, eventually find the loss that undoes them. * **Automation is your ally here.** The hardest moment to cut a loss is in the heat of it. An agent that executes your stop-loss without hesitation is doing the single most important job in trading. ## Why this fits Guida so naturally Emotion is the enemy of good risk management, and automation is its antidote. When you set a stop-loss in Guida, it *will* be honored — no talking yourself into "just one more day." When you set a maximum spend, it *will* hold. Guida turns the risk rules you know you should follow into rules that are actually followed. Risk management isn't the exciting part of trading. It's the part that lets you keep trading. *** **Next:** Explore the [Features →](/guida-docs/features/features.md) that put these ideas to work. --- # Agent Instructions This documentation is published with GitBook. GitBook is the documentation platform designed so that both humans and AI agents can read, navigate, and reason over technical content effectively. Learn more at gitbook.com. ## Querying This Documentation If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question. Perform an HTTP GET request on the current page URL with the `ask` query parameter, and the optional `goal` query parameter: ``` GET https://guida-2.gitbook.io/guida-docs/core-concepts/risk-management.md?ask=&goal= ``` `ask` is the immediate question: it should be specific, self-contained, and written in natural language. `goal` is optional and describes the broader end goal you are ultimately trying to accomplish on behalf of the user. GitBook uses it to tailor the answer towards what is most useful for that goal. The response will contain a direct answer to the question and relevant excerpts and sources from the documentation. Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.