$100 Account
1% = $1 per trade
2% = $2 per trade
5% = $5 per trade (aggressive)
Risk Management: The 1-2% Rule
Most traders don't blow their accounts because of bad entries. They blow accounts because of bad position sizing. Learn the one rule that separates survivors from statistics.
The Math That Kills Accounts
Imagine you have $100 and risk 20% per trade ($20). After just 5 losses:
Trade 1$100 → $80
Trade 2$80 → $64
Trade 3$64 → $51
Trade 4$51 → $41
Trade 5$41 → $33
You've lost 67% of your account. Now you need to double just to get back to breakeven.
With 2% risk ($2 per trade): After 5 losses, you still have $90. You can continue trading and learning.
The 1-2% Rule Explained
- Conservative (1%): $100 account = $1 per trade. Survives 100 losses.
- Standard (2%): $100 account = $2 per trade. Survives 50 losses.
- Aggressive (3-5%): Only for experienced traders with proven edge.
- Gambling (10%+): Not trading. Just slow suicide.
Even professional traders rarely risk more than 2% per trade. If it's good enough for them, it's good enough for you.
Why Martingale Doesn't Work
Martingale = doubling your stake after each loss to "recover." Sounds logical, but math says otherwise:
| Loss # | Stake | Total Lost |
|---|---|---|
| 1 | $1 | $1 |
| 2 | $2 | $3 |
| 3 | $4 | $7 |
| 4 | $8 | $15 |
| 5 | $16 | $31 |
| 6 | $32 | $63 |
| 7 | $64 | $127 |
A 7-loss streak (which happens more often than you think) requires $127 to continue with a $1 starting stake. If you started at $10, that's $1,270.
Read the full mathematical breakdown of why Martingale fails →
How to Calculate Position Size
Formula: Position Size = Account × Risk Percentage
$500 Account
1% = $5 per trade
2% = $10 per trade
5% = $25 per trade (aggressive)
$1000 Account
1% = $10 per trade
2% = $20 per trade
5% = $50 per trade (aggressive)
Daily Loss Limits
Beyond per-trade limits, set daily maximums:
- 3 losses in a row: Take a break (30+ minutes)
- 5% daily loss: Stop trading for the day
- 10% weekly loss: Review your strategy before continuing
Discipline beats strategy. A mediocre strategy with strict risk management beats a great strategy with no discipline.