Risk & Money Management
Beginner
1% Rule
Also called: 1% rule, two-percent rule
Never risk more than 1% of account equity on a single trade — the most widely-quoted retail money management rule.
Definition
The 1% rule caps the damage from any single losing trade at 1% of equity. At 1% risk per trade, you’d need 100 consecutive losers to wipe out — statistically near-impossible for any strategy with positive expectancy.
Aggressive traders push to 2–3%; conservative or pro traders often use 0.25–0.5%. The right number is the one that lets you survive realistic losing streaks without panicking.
Example
10-trade losing streak at 1% risk: equity goes from $10,000 to ~$9,044 — uncomfortable but survivable. Same streak at 5% risk: $10,000 to ~$5,987 — catastrophic.