> For the complete documentation index, see [llms.txt](https://docs.bitfoot.com/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.bitfoot.com/trading-guides/getting-started/risk-management-101.md).

# Risk Management 101

Managing risk is crucial to sustainable trading, especially in high-volatility markets. Effective risk management minimizes losses and helps you stay in the game longer.

## **Core Risk Management Techniques**

### **Stop-Loss Orders**

Set stop-loss orders to automatically sell your token if its price drops below a certain level, limiting potential losses.

### **Position Sizing**

Only risk a small percentage of your total trading capital per trade. A common rule is to risk no more than 1-2% on a single trade.

### **Diversification**

Spread your investments across different tokens and sectors to reduce risk. Avoid “putting all your eggs in one basket.”

### **Taking Profits**

Scale out by taking partial profits as prices rise. This way, you protect some gains and lower your risk while allowing the rest of your position to run.

### **Avoid FOMO (Fear of Missing Out)**

Resist the urge to jump into trades because of hype. Stick to your strategy and avoid emotional decisions.

### **Keep Emotions in Check**

Emotional trading often leads to poor decisions. Use a clear plan and follow your strategy consistently.