💰
Sudo Gitbook
  • 👋Welcome to Sudo
  • Overview
    • 💡What is Sudo
    • ✨Sudo Features
  • Trade on Sudo
    • 💎Start trading
      • Supported Assets
      • Fees
      • Market Hours
    • 📚Educational Resources
      • What Are Perpetual Futures?
      • Using Leverage Wisely
      • Risk Management Fundamentals
      • What is Sharpe Ratio
      • Real Trading Scenarios
      • Avoiding Rookie Mistakes
  • Liquidity Providers
    • 💰How to provide liquidity
    • 🛰️SLP
    • 🏦SLP Staking
  • S Rewards
    • S Card
      • Getting S Card
      • S Points
      • Using Your S Card
  • Sudo API
    • Sudo API Reference
      • Trader Data
      • Market Info
  • Sudo SDK
    • Introduction to Sudo SDK
    • Core Concepts
    • Installation and Setup
    • Quick Start
    • 📚v0.0.6
      • API Reference
        • SudoAPI
          • Open Position
          • Decrease Position
          • Pledge In Position
          • Redeem From Position
          • Cancel Order
          • getPositionCapInfoList
          • getPositionInfoList
          • getPositionConfig
        • OracleAPI
          • subOraclePrices
      • Changelog
    • Best Practices
    • Troubleshooting
  • Feature Details
    • Algorithm Balanced Funding Rate (ABFR)
    • Risk control
    • FAQ
    • Roadmap
    • On-chain program
Powered by GitBook
On this page
  1. Trade on Sudo
  2. Educational Resources

Risk Management Fundamentals

🛡️ Risk Management 101: Protecting Your Capital in Perps Trading

Risk management is the foundation of long-term success in crypto perpetual futures trading. It’s not about maximizing wins — it’s about minimizing catastrophic losses and staying in the game when volatility strikes.

“Amateurs focus on rewards. Professionals focus on risk.”

— Jack Schwager


✅ Core Principles of Risk Management

1. Only Risk 1–2% Per Trade

Never risk more than 1–2% of your total trading capital on a single position. This ensures that even a string of losing trades won’t wipe you out.

Example:

• Trading account size: $10,000

• Max risk per trade (2%): $200

• If stop-loss is $50 below entry → your position size should be 4 contracts.

This is known as position sizing.


2. Use Stop-Loss Orders — Always

Stop-losses should be pre-defined before entering the trade.

• Hard stop-loss: Automated order set at a specific price

• Mental stop-loss: You monitor manually (less reliable)


3. Avoid Overleveraging

High leverage can destroy your capital fast. While 20x+ leverage is available, professional traders rarely go beyond 5x.

Leverage

Drawdown Needed to Liquidate

3x

~33%

10x

~10%

20x

~5%

Pro tip: Use lower leverage and increase position size if you want more exposure — not the other way around.


4. Factor in Maintenance Margin & Liquidation

Understand that liquidation occurs if your equity falls below the maintenance margin level.

• Initial margin: Collateral to open the trade

• Maintenance margin: Minimum required to keep it open

Always monitor how close your trade is to liquidation and avoid maxing out margin usage.


5. Diversify Trade Risk

Don’t stack multiple trades in the same direction on highly correlated assets (e.g., BTC, ETH, SOL). This concentrates risk and can trigger a cascade of losses.

“Risk management is not just about single trades — it’s portfolio-wide discipline.”


6. Avoid Emotional Trading

Trading on tilt (after a loss) often leads to revenge trading, oversized positions, and irrational decisions.

Create a trading journal to:

• Log your rationale

• Track R:R ratio

• Measure performance over time

• Identify emotional triggers


7. Understand Volatility and Slippage

Set wider stops during volatile market periods, and always account for slippage (getting filled at worse-than-expected prices) when calculating risk.

Tool
Purpose

Stop-loss orders

Limit downside per trade

Take-profit orders

Lock in gains and avoid FOMO exits

Position size calc.

Adjust trade size to match % risk rule

Journal/log

Improve emotional control & strategy review

Volatility metrics

Adjust entries, stops, and size accordingly

🧠 Final Takeaways

• Think like a risk manager, not a profit chaser

• Always have a plan for the worst-case scenario

• Survive first, then thrive

“There are old traders, and there are bold traders, but there are no old bold traders.”

PreviousUsing Leverage WiselyNextWhat is Sharpe Ratio

Last updated 1 month ago

📚