Risk per trade
The 1% rule in trading
Never lose more than 1% of your account on a single trade. It is the simplest risk rule there is, and the one most traders break first. Here is how it works, with numbers.
The 1% rule says you never risk more than 1% of your trading account on one trade. With $10,000 in the account, the most you may lose on any single trade is $100. That's the whole rule. It sounds almost too simple, and that is exactly why it works: you can follow it on every trade, including the ones you take in a hurry.
What the 1% rule is, and what it isn't
The 1% is the money you lose if your stop loss is hit. It is not the size of the position and it is not the margin.
A $10,000 account can open a position worth far more than $10,000 and still follow the 1% rule, as long as the distance to the stop is small enough that hitting it costs $100. In the other direction, a tiny position with no stop loss breaks the rule, because its possible loss has no limit.
So the order is always the same:
- Decide where the stop goes, from the chart.
- Take 1% of the account in dollars.
- Calculate the lot size that makes the loss at the stop equal to that amount.
Why 1%: the losing streak math
Every strategy, even a good one, has losing streaks. What decides whether you survive them is how much each loss costs. Here is an account after ten losses in a row:
| Risk per trade | Account after 10 losses in a row |
|---|---|
| 1% | −9.6% |
| 2% | −18.3% |
| 5% | −40.1% |
| 10% | −65.1% |
The numbers get worse than they look, because a drawdown needs a larger gain to recover:
| Drawdown | Gain needed to get back to the start |
|---|---|
| 10% | 11.1% |
| 20% | 25% |
| 40% | 66.7% |
| 65% | 185.7% |
At 1%, a ten-trade losing streak is an annoying week. At 10%, it is close to the end of the account.
Examples: from 1% to a lot size
Take a $10,000 account. 1% is $100.
| Trade | Stop | Value per lot | Lot size |
|---|---|---|---|
| EURUSD | 20 pips | $10 per pip | 100 ÷ (20 × 10) = 0.50 |
| USDJPY at 150.00 | 30 pips | about $6.67 per pip | 100 ÷ (30 × 6.667) = 0.50 |
| XAUUSD | $10 | $100 per $1 | 100 ÷ (10 × 100) = 0.10 |
Same rule, three very different lot sizes, because the stops are different. That is the point: the risk stays fixed and the size adjusts. If you want to check the math, use the lot size calculator, or the gold lot size calculator for XAUUSD. The lot size guide explains every step.
A fixed percent shrinks when you lose
Because the rule is a percentage, the dollar risk follows the account. After a few losses, 1% of a smaller account is a smaller amount, so each further loss hurts a little less. After a few wins, it grows with you.
To get this benefit, recalculate the dollar amount from the current balance, before every trade or at least at the start of every day. Traders who fix "$100 per trade" and keep it while the account falls lose that protection.
When to risk less than 1%
1% is a ceiling, not a target. Many traders go lower in these cases:
- Prop firm challenges. With a 5% daily loss limit and a 10% maximum loss, 0.5% per trade gives you room for a normal losing streak without getting close to either limit. See prop firm daily loss limits.
- Several trades at once. Three open trades at 1% each are 3% at risk. If they are correlated, like EURUSD, GBPUSD and AUDUSD all long, they behave like one 3% trade.
- A new strategy or a new market. Until you have a real record, smaller risk keeps the learning cheap.
- After a run of losses. Some traders cut risk in half after a set drawdown and only return to full risk after recovering.
Why traders break it, and how to stop
Almost nobody breaks the 1% rule on a calm day. It gets broken after two losses, when the next trade "has to" win the money back and the lot size quietly doubles. That is revenge trading, and a rule that lives only in your head doesn't survive it.
RavandFX makes the rule mechanical. You set your risk per trade once, and on your MetaTrader 5 chart every lot size is calculated from it as you drag the stop, rounded down and capped by balance. The risk per trade is locked into your licence: making it smaller applies at once, while raising it waits 24 hours and is allowed only once a month. On a bad afternoon, 1% stays 1%. Try it in the free simulator.
Common questions
Is the 1% rule good for small accounts?
The idea is the same, but the minimum lot size gets in the way. On a $100 account, 1% is $1, and even 0.01 lot of EURUSD with a 20-pip stop risks $2. Small accounts often have to skip trades, use tighter stops or use a cent account to keep the rule.
Is 2% risk per trade too much?
Not necessarily. Many experienced traders use 1% to 2%. The difference shows in losing streaks: ten losses in a row cost about 9.6% at 1% risk and about 18.3% at 2%. Above 2%, a normal bad run starts to do real damage.
Should I use 1% of my balance or my equity?
Most traders use the balance, recalculated before each trade or at the start of each day. If you often hold several trades at once, using equity is more conservative, because it already includes the floating loss of the open trades.
Does the 1% include spread and commission?
The 1% is the loss from your entry to your stop. Spread, commission and slippage add a little on top, so some traders size for 0.9% to leave room.