The 1% Rule: How Much to Risk Per Trade

The 1% rule is a common guideline stating that you shouldn’t risk more than 1% of your total account balance on any single trade. It’s less about the exact number and more about the principle of protecting your capital.

Why 1% specifically

At 1% risk per trade, it takes roughly 20 consecutive losing trades in a row to cut your account in half — a losing streak that’s unlikely but not impossible. At 5% or 10% risk per trade, the same drawdown can happen in just a handful of bad trades.

How it works in practice

Before entering a trade, you calculate 1% of your account balance in currency terms, then work backward: given your stop loss distance in pips, you size your position (lot size) so that if the stop loss is hit, the loss equals roughly that 1%.

It’s a starting point, not a fixed law

Some experienced traders adjust their risk per trade between roughly 0.5% and 2% depending on how confident they are in a setup, but very few professionals consistently risk much more than that on a single trade.

Why it matters more than any single trade

No single trade should be able to seriously damage your account, because no single trade’s outcome is guaranteed. The 1% rule ensures a string of bad luck or bad decisions doesn’t end your ability to keep trading.

Key takeaway

Position sizing based on a fixed, small percentage of your account is one of the simplest and most effective ways to survive long enough in trading to become consistently profitable.