Risk Management for Trading Bots: The Complete Guide

A trading bot without risk controls is not a strategy — it is a liability. In Setup.Cash, risk management is a first-class part of every blueprint. This guide covers the controls you should set before any bot goes live.

The Core Four

Every strategy should define four things:

1. Stop loss — where you are wrong and exit the trade.
2. Take profit — where the trade has done its job.
3. Risk per trade — how much capital a single loss costs.
4. Max open trades — how much total exposure the bot can carry.

If any of these is missing, the strategy cannot start a live run — the platform requires a real risk configuration.

Stop Loss Types

Setup.Cash supports several stop styles:

• ATR-based — adapts to volatility (e.g., 1.5× ATR). Best default for changing conditions.
• Pips — a fixed distance, useful for stable instruments.
• Percent — a fixed percentage of price.

ATR stops are usually the most robust because they widen in volatile markets and tighten in quiet ones. Read more in stop loss types explained.

Take Profit and R:R

Take profit can be set as a risk-reward ratio (e.g., 2R), a pip target, or an ATR multiple. Expressing targets as R:R keeps the math honest: a 2R target means each winner pays for two losers.

Position Sizing

Position size should follow from your stop, not the other way around. Decide the dollar (or percent) risk per trade, and let the stop distance determine the size. This keeps every trade's risk consistent regardless of volatility.

Max Open Trades

maxOpenTrades caps how many positions the bot holds at once. In Setup.Cash the default scales to the number of pairs you scan, so a basket of 11 pairs can hold up to 11 concurrent positions — one per pair — rather than queueing behind a small cap. Lower it if you want tighter exposure.

Re-Entry Cooldown

After a trade closes on a pair, the re-entry cooldown sets how long before the bot can enter that same pair again (default 24h, configurable down to "each scan"). This prevents the bot from immediately re-entering the same losing idea.

Guards: News, Spread, and Daily Limits

Beyond per-trade risk, add portfolio guards:

• News guard — block entries around high-impact economic events.
• Spread guard — skip trades when the spread is too wide.
• Max trades per day and drawdown guards — stop trading after a bad run.

One Market Per Bot

A single bot scans one market type — all forex, all crypto, or all stocks. This keeps sessions, data feeds, and brokers consistent. Run separate bots for separate markets.

Build Risk In From the Start

The biggest mistake is treating risk as an afterthought. Configure stops, targets, sizing, and guards when you build the strategy, then backtest to confirm the risk profile behaves as expected. Good risk management will not make a bad strategy profitable — but poor risk management will sink a good one.

Open the builder and set your risk node before you run anything.