The 1% Rule: Why Professional Traders Never Risk More
The 1% Rule is simple: never risk more than 1% of your trading capital on a single trade. It is the most important rule in trading.
The Math Behind 1%
Different risk levels after 10 consecutive losses:
| Risk Per Trade | After 10 Losses | Recovery Needed |
|---|---|---|
| 1% | 90% remains | 11% to recover |
| 2% | 82% remains | 22% to recover |
| 5% | 60% remains | 67% to recover |
| 10% | 35% remains | 186% to recover |
The Asymmetry Problem: A 50% loss requires a 100% gain to recover. This is why capital preservation matters more than profit maximization.
How to Implement the 1% Rule
Step 1: Calculate your risk amount
Risk = Account Balance * 0.01
$10,000 * 0.01 = $100
Step 2: Calculate position size
Position Size = Risk / (Entry - Stop Loss)
When to Adjust
Go Lower (0.5%)
- During losing streaks
- High volatility markets
- Learning new strategies
- Small account size
Go Higher (2%)
- Proven edge with data
- A+ setup confluence
- Strong risk/reward (1:4+)
- Never above 2%