How much should you risk per trade? The 1% rule, explained
How much you risk per trade decides whether a bad week is an inconvenience or the end of your account. It matters more than your entry, your indicator or your win rate. The good news: it's the one thing in trading you control completely.
The short answer
Most professional guidance is 0.5% to 2% of your account per trade, with 1% the most common. Beginners, anyone on a new strategy and anyone on a prop firm challenge should sit at the low end.
What each level does in a losing streak
Every strategy has losing streaks, including good ones. Here's what a run of losses does at each risk level (risking a percentage of the current balance each time):
| Risk per trade | Account left after 10 losses | Losses to be down 10% | Losses to be down 20% | Gain needed to recover from 10 losses |
|---|---|---|---|---|
| 0.5% | 95.1% | 22 | 45 | 5.1% |
| 1% | 90.4% | 11 | 23 | 10.6% |
| 2% | 81.7% | 6 | 12 | 22.4% |
| 3% | 73.7% | 4 | 8 | 35.6% |
| 5% | 59.9% | 3 | 5 | 67.0% |
| 10% | 34.9% | 1 | 3 | 186.8% |
Look at the last column. At 1%, a ten-loss streak needs a 10.6% gain to recover: a decent month. At 5%, you need 67%: a great year, if it ever comes. That gap is why the 1% rule exists. How likely those streaks are is worked out in drawdowns and losing streaks.
Choosing your number
- 0.5%: while you're learning, testing a new setup, or trading a prop firm challenge with tight loss limits.
- 1%: the default once you have a written plan and at least 50 journaled trades that show an edge.
- 2%: the ceiling for most experienced traders, and only with a proven, consistent record.
- Above 2%: this is gambling with extra steps. A normal losing streak will do serious damage.
Four rules that go with it
- Cap your total open risk. Three trades at 1% each is 3% at risk at once. Many traders cap all open trades at 2% to 3% combined.
- Treat correlated trades as one. Short EURUSD and short GBPUSD are both a bet on the dollar rising. If both lose, they lose together.
- Cut risk in a drawdown, never raise it. A common rule is to halve your risk once you're 5% down from your peak, and return to normal when you've made it back. Raising risk to “win it back” is how drawdowns become blown accounts (see how to stop revenge trading).
- Set a daily stop. Two or three losses, or a fixed percentage, and you're done for the day.
Percentage or fixed amount?
Risking a percentage of your current balance automatically shrinks your trades in a drawdown and grows them as you profit. Risking a fixed amount (say £20 a trade, reviewed monthly) is simpler and keeps your results easy to compare. Both are fine. What matters is that every trade risks the same amount, so your results in R mean something.
Risk only works with an edge
Good risk management keeps you in the game; it can't make a losing strategy profitable. Your edge comes from your win rate and your reward to risk together. At 1:2 with a 40% win rate, each trade is worth +0.2R on average, so at 1% risk you'd expect around +0.2% per trade over time, with plenty of noise along the way. The maths is in risk to reward ratio explained.
Once you've chosen your risk, turn it into a lot size with how to calculate lot size or the free lot size calculator.
See your real drawdown, not a guess
Set a starting balance in The Trader's Ledger and it shows your balance, return and maximum drawdown alongside your results in R, by setup and session. £19 once, with a free 49-page trading course.
Get The Trader's LedgerFrequently asked questions
What is the 1% rule in trading?
Never risk more than 1% of your account on a single trade. Your stop loss and lot size are set so that if the stop is hit, you lose 1% at most.
Is 2% risk per trade too much?
2% is the upper limit most professionals use. It's workable with a proven strategy, but ten losses in a row would cost about 18%, so beginners are better at 0.5% to 1%.
How much should I risk on a small account?
The same percentage. Small accounts are tempting to push harder, but the maths of losing streaks doesn't change with account size. Use 0.01 lots and tight, honest stops.
Should I risk more on A+ setups?
Some traders do, for example 1% normally and 1.5% on their best grade, but only once their journal proves those setups really do perform better. Until then, keep it the same.
Educational content only, not financial advice. Trading carries a high level of risk and you can lose more than you expect. Examples use illustrative prices.