The short answer
A common rule is to risk 1% of your account per trade. That means if your stop-loss is hit, you lose about 1% of your balance. The aim is not to make the rule sacred. It is to make sure no single trade, and no normal losing streak, can do serious damage.
Why small risk matters: ten losses in a row
Every strategy has losing streaks. Even a strategy that wins 50% of trades will, over a hundred trades, usually produce a streak of six or seven losses in a row. The table shows what ten consecutive losses do at different risk levels:
| Risk per trade | Account after 10 losses | Gain needed to recover |
|---|---|---|
| 1% | −9.6% | +10.6% |
| 2% | −18.3% | +22.4% |
| 5% | −40.1% | +67.0% |
| 10% | −65.1% | +186.8% |
At 1% a ten-loss streak is uncomfortable but recoverable. At 5% it cuts the account by 40% and needs a 67% gain just to get back to even. At 10% it is close to a wipe-out. The jump in recovery cost is explained in why a 50% loss needs a 100% gain.
What should change your number
- Win rate and payoff. A strategy that wins 35% of the time has longer losing streaks than one that wins 65%, so it needs smaller risk. See expectancy.
- How many positions you hold at once. Five correlated trades at 1% each behave like one trade at 5%.
- Your drawdown tolerance. If a 20% drawdown would make you stop trading, plan for streaks that produce less than that.
- Account size and costs. On very small accounts, fees can make a strict 1% risk impractical.
How to choose your own number
- Enter your win rate, average win and average loss in the strategy simulator and try 0.5%, 1% and 2% risk. Look at the 1-in-20 drawdown.
- Check the chance of ruin for each in the risk of ruin calculator. Aim for under 1%.
- Compare with the Kelly criterion. Risking more than about half of Kelly is rarely wise because your inputs are only estimates.
- Convert the percentage into a number of shares or lots with the position size calculator.
A note on the 1% rule
It is a starting point, not a law. Some traders with a proven edge and small correlation use 2%. Many beginners are better at 0.25% or 0.5% while they learn. What matters is that the number comes from your own numbers, not from a headline.
Try it with your own numbers
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Quick questions
What is a good risk per trade for a beginner?
Many beginners start at 0.25% to 1% of their account until they have enough trades to know their win rate and payoff.
Is risking 2% per trade too much?
Not necessarily. With a proven edge and uncorrelated trades, 2% can be reasonable. It produces roughly twice the drawdowns of 1%, so test it in a simulator first.
Find better trades, then size them well.
Risk control keeps you in the game. These indicators help you find setups with room to run.
Keep reading
Last updated October 2026. For education only. Not financial advice.