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's the single most important rule in trading, yet most beginners ignore it.
The Math Behind 1%
Let's see what happens with 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 is more important 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 = $100 / (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%