Why many traders risk only 1% per trade
Keeping risk per trade small means your account survives a long losing streak. See how risking 1%, 5% and 10% compare in numbers.
- Long losing streaks can happen to any system
- Risk 1% and lose 10 in a row, and you still have about 90% of your account
- A 50% loss needs a 100% gain to get back to where you started
Limiting the risk on each trade to a small slice of your account means that after a long losing streak, you still have enough money to keep trading. Losing streaks happen to every system, no matter how good it is.
See it side by side
| Risk per trade | Account left after 10 losses in a row (approx.) |
|---|---|
| 1% | 90% |
| 2% | 82% |
| 5% | 60% |
| 10% | 35% |
Bigger losses need even bigger gains to recover
| Account drop | Gain needed to get back to even |
|---|---|
| 10% | 11% |
| 25% | 33% |
| 50% | 100% |
1% is not a fixed rule. It is a starting point that helps keep mistakes from turning into big problems.
Make it a habit
- Set your risk per trade before you open the chart
- Place your Stop loss where the chart structure says, not where the money you want to lose says
- Work out the lot size from the two steps above
- If you hit your daily loss limit, stop and take a break
Frequently asked questions
Does risking 1% mean opening a lot size equal to 1% of my account?
No. It means that if your Stop loss is hit, you lose 1% of your account. The lot size still has to be worked out from your Stop loss distance.
This is general education, not investment advice. Trading is risky and you may lose all of your capital.