What is at Risk?

The objective in trading is to make money. But capital preservation is really what keeps a good trader in the game. Quantifying the maximum potential loss before entering a trade is critical. A good rule of thumb is to risk at most 2 % of the total trading capital in any given trade, but a trader often takes into account margin and minimum capital requirements. The idea is that a down turn in the market won’t take the trader out of the game.
Also, I have observed in my own trading that I often follow a swing-momentum strategy where the trades I enter are highly correlated which increases the probability of a large draw-down. Since I tag all my trades now in the journal I can track how correlated my positions are and adjust position sizes according to the absolute maximum risk for the account.
To make things easier, I use the position size / risk calculator on my iPhone after I figure out the risk dollar amount for a trade.