How to Manage Trade Risk to Get Into the Big Winners
In trading, everyone dreams of catching the big winners—the trades that run for days, weeks, or even months and generate outsized returns. But here’s the truth: you can’t get to those big wins without smart risk management.
Most traders either get shaken out too early or take on too much risk and blow up their account. Learning how to manage trade risk properly gives you the staying power and clarity to hold on when it matters most—and to survive the trades that don’t work out.
Why I Do the Opposite of What Feels Right in Trading
This is going to sound weird, but stick with me.
When I trade, especially long positions, I do the opposite of what feels natural. That means I often buy when the market is falling — not rising. And yeah, it feels uncomfortable every single time. But that discomfort is kind of the point.
Check for the Time
Take daily timeframes, for example. If I’m thinking about going long, I’m usually looking for a market that’s just had a few rough days. Maybe it’s hitting a 3-to-5-day low, or dropping below a decent-length moving average. If that day’s candle is also red — even better. That’s my kind of setup. I want the price coming down.
Now, I’ve sat in plenty of conferences where money managers talk about “buying into strength.” And look, that works great in a full-blown bull market. But in a sideways or uncertain market? That strategy gets people wrecked.
The market doesn’t trend as much as people think. Most of the time — and I mean a lot of the time — it just chops around. Goes up a bit, down a bit, and ends up nowhere.
Trading Feels Backward — But That’s Why It Works
Doing the Opposite of What Feels Right
Alright, let me just say this straight — what works in trading feels completely wrong most of the time. I’m talking about buying when the market is dropping, not rising. Sounds dumb, I know. Took me a long time to stop fighting that feeling.
Why I Buy When It’s Falling
Here’s what I do. Let’s say I want to buy — I wait for the market to be in the red. Not just for the day, but maybe for 3-5 days. If it’s below a moving average, even better. And I don’t mean I like doing this. It sucks. My gut tells me to run. But that’s exactly when I know it might be time to get in.
What Experts Say… And Why I Disagree
I’ve been to talks where the “experts” say to buy strength. Sure, maybe that works when everything’s flying. But right now? That’s asking for trouble.
Markets Move Sideways More Than You Think
Markets mostly go sideways — up, down, up, down — but not really going anywhere. You look at the data, and it says about two-thirds of the time, it’s just bouncing in a range. That alone tells me: buying when it’s going up doesn’t give much room before it hits resistance and turns around.
Tight Stops and Better Entries
But if you buy when it’s dropping into support? Your downside’s limited. You can set a tight stop. It doesn’t feel good, but that’s kind of the point.
Fear Is a Signal — Not a Warning
And here’s the part nobody talks about — fear is a signal. If I’m scared to buy, chances are everyone else is too. And when everyone’s already sold? There’s nobody left to push it lower. That’s when things turn. I’ve seen it so many times, I’ve stopped questioning it.
A Real Example From the S&P
Like, if the S&P is falling back toward 1280 — and that’s a recent low — I start paying attention. If it gets close, I might buy. Maybe I put my stop at 1275. It’s close, and if it breaks, I’m out, no big deal. But most of the time, it bounces. I’m in, and I got a solid entry.
The Mental Battle Before Every Trade
Still, every time this happens, there’s that mental tug-of-war. One part of me thinks I’m buying a falling knife. The other part hopes I just nailed the bottom. The more it falls, the more scared I get — but also the better the risk-reward becomes. Eventually, I act. Not always perfectly. Sometimes too early, sometimes too late. But I act.
What I’ve Learned From Years of This
After years of doing this, here’s what I’ve learned: if I’m not nervous getting into a trade, it’s probably not a great setup. My best entries almost always feel uncomfortable. But they also come with small stops, which means small losses when I’m wrong — and huge potential when I’m right.
How I Stay in the Game
And that’s how I stay in the game. Trading’s tough. It beats people up. But if I’m keeping losses small and not chasing hype, I don’t get emotionally wrecked. That keeps me steady for when the real moves come — because they always come, usually after most people have quit.
Kipling said it best: “If you can keep your head when all about you are losing theirs…” Yeah. That’s the trick.
Do What Feels Wrong
So yeah — do what feels wrong. That’s usually what works.
Conclusion –
Big wins don’t come from luck—they come from consistency. When you manage risk the right way, you avoid the emotional rollercoaster and give your trades room to work.
It’s not about being perfect; it’s about being prepared. Protect your downside, stay patient, and when the right setup comes along, you’ll be ready to ride it for all it’s worth.