Risk management: the 1% rule
How much to risk per trade, how to size a position, and why it decides whether you survive.
Good entries make money. Good risk management keeps it. Most new traders who blow their accounts were not wrong about the market; they simply risked too much on a few trades.
The 1% rule
Risk no more than 1% of your account on any single trade (2% at the very most). With a $5,000 account, that is $50 per trade. It feels small, but it means ten losses in a row, which will happen, cost you about 10%, not half your account.
Position sizing
Your risk is set by your stop-loss, not your lot size. Work backwards:
Position size = money at risk ÷ distance to stop
Example: account $5,000, risk 1% = $50. You buy gold at 2,650 with a stop at 2,640, which is $10 per ounce. Position size = $50 ÷ $10 = 5 ounces. If gold hits your stop you lose $50, exactly as planned.
Why drawdowns are dangerous
Losses need bigger gains to recover: lose 10% and you need +11% to get back; lose 50% and you need +100%. Keeping losses small is mathematically more important than making big wins.
Practise risk-free
Use the $100,000 paper account on Supercharts or join the monthly Paper Championship. Size every trade with the formula above until it becomes a habit.
Educational content only, not financial advice. Trading involves risk of loss.