I’m confused someone enlighten me please :47:.
For the most part, they are two sides of the same coin.
But we can break it down a little better.
Risk management would be looking at a setup before you enter, and deciding if it’s worth it. For instance, you have a three part system.
And part A, and B, were spot on, and part C was ALMOST the perfect setup, but not quite. If A and B really are standouts, and there’s a chance it still may work, you would consider this a less than stellar setup, and manage your risk accordingly.
The trade might still work, as it has in the past, but not as often as it does when A, B, AND C, are all in perfect alignment.
You would manage your risk by either A: not entering at all, or B: entering, but using far less capital than your normal setup.
Now, say two different setups came along, and both were grade A.
A perfect alignment of all three criteria in your setup, and you have a good feeling about them.
However one of them is a bit stretched out, and would require 4% risk if you use your standard sized lots, while the other one would only risk 1% using your standard lots.
Money management would have you do a little math to bring the trade that is going to cause you more risk, into alignment with the 1% risk idea.
So you would downsize your lots to be a quarter of the size for that particular trade, giving you the 1% risk.
In both cases, you have assessed, and managed risk, and in both cases one of the solutions or more, involved money management.