Risk & Money Management
Beginner
Risk Per Trade
The maximum dollar (or percent) amount you allow yourself to lose on a single trade.
Definition
Risk per trade is set as a percent of account equity (commonly 0.5–2%) and combined with stop distance to derive position size. Keeping it constant in % terms means losses shrink with your account in drawdown and grow with your account in profit — automatic compounding.
Example
Account: $20,000. Risk per trade: 1% = $200. Trade with 40-pip stop on EUR/USD → lots = $200 / (40 × $10) = 0.5 lots.