The principle
The 1% rule means never losing more than 1% of your capital on a single trade. On a $10,000 account, the maximum loss on one trade is $100. What's fixed isn't the position size, but what the trade costs if the stop is hit.
Losing streaks always come
With a 50% win rate, a streak of at least 6 losses in a row over 200 trades happens about 4 times out of 5. With a 40% win rate, a streak of at least 8 losses happens about 3 times out of 4 (simulation estimates). Here's what those streaks cost depending on your risk per trade:
| Risk per trade | After 5 losses in a row | After 10 losses in a row |
|---|---|---|
| 0.5% | −2.5% | −4.9% |
| 1% | −4.9% | −9.6% |
| 2% | −9.6% | −18.3% |
| 5% | −22.6% | −40.1% |
At 1%, the worst streak of the year remains a drawdown you recover from. At 5%, it puts the account at −40%, which then takes a 67% gain to recover (see the drawdown table).
Calculating your position size
Size comes from three things: your capital, the risk you choose and the distance to your stop. Size = (capital × risk) ÷ (stop distance × value per point). Example: $10,000 account, 1% risk, a 20-pip stop on EUR/USD, where a standard lot is worth about $10 per pip: the size is about 0.5 lots.
The position size calculator does this for forex, gold, indices and crypto, including currency conversion.
Is your real risk the one you think it is? The free diagnostic compares your losses with your planned risk and flags the trades that went beyond it.
1%, 0.5% or 2%?
- 0.5%: suited to beginners, to prop firm challenges with tight limits, and to periods of doubt.
- 1%: the most common compromise for a personal account.
- 2%: for a strategy proven over a large sample of trades; losing streaks get much deeper.
Whatever the number, what matters is that it's fixed: risk that goes up after a loss is one of the signatures of revenge trading.
FAQ
What is the 1% rule in trading?
Never lose more than 1% of your capital on a single trade. You set the stop first, then calculate the position size so that hitting the stop costs exactly 1%.
How many losses in a row should I plan for?
More than you think: with 50% winners, a streak of at least 6 losses over 200 trades happens about 4 times out of 5. Your risk per trade should make those streaks bearable.
Should I risk 1% or 2% per trade?
1% is the most common choice for a personal account. 2% makes losing streaks twice as deep; keep it for a proven strategy. At prop firms, 0.5% to 1% is common.