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The 1% rule

Lesson 1.3 Free

The 1% rule

Risk a fixed small percentage of your account on every trade, often 1%. A run of losses then costs you a little, not everything.

In this lesson you learn the 1% rule: a fixed, small amount of risk on every trade, worked out from your equity.

  1. 1 What the rule says

    Before each trade, decide how much money you will lose if the stop is hit. That amount is your risk. The 1% rule says: make it no more than 1% of your account.

    Account1% risk per trade
    $500$5
    $1,000$10
    $10,000$100

    Risk is not the size of the position. It is the money you lose if the trade goes to your stop.

    Quick check

    1. Question 1 · Calculation

      Your account is $2,500. How much do you risk on one trade under the 1% rule?

    2. Question 2 · Multiple choice

      What does "risk" mean in the 1% rule?

  2. 2 Why such a small number

    Every trader has losing streaks. The rule makes sure a streak is survivable.

    Example with $1,000 and ten losing trades in a row:

    • Risking 1% each time, the account ends near $904 (about −9.6%). You need about +10.6% to recover.
    • Risking 10% each time, the account ends near $349 (about −65%). You need about +187% to recover.

    Working for the 1% case: each loss leaves 99% of what was there, so $1,000 × 0.99¹⁰ ≈ $904. For 10%: $1,000 × 0.90¹⁰ ≈ $349.

    Same trades, same entries. Only the risk per trade changed.

  3. 3 Use equity, and let the number move

    Work out 1% from your equity (lesson 1.1), not from the balance you started with.

    After losses, 1% is a smaller amount, so you automatically risk less while you are losing. After gains, 1% grows with the account.

    Example: you start with $2,000, so 1% is $20. After some losses your equity is $1,800. Now 1% is $18.

    Some traders use less than 1%, such as 0.5%. The point is a small, fixed percentage that you apply to every single trade.

    Quick check

    1. Question 3 · Calculation

      Your equity has fallen from $3,000 to $2,700. Under the 1% rule, what is your risk on the next trade?

  4. 4 Find your number in the terminal

    Open the account panel in the practice terminal and read your equity. Multiply it by 0.01. That is the most you should lose on your next trade.

    Write the number down before you open the order ticket. Lesson 1.4 turns it into a lot size.

    The practice terminal's account panel for a new practice account with no trades (staging, 16 Oct 2026): Balance and Equity both 10,000.00, Margin 0.00, Free margin 10,000.00, Margin level — and Leverage 1:100.
    The practice terminal's account panel for a new practice account with no trades (staging, 16 Oct 2026): Balance and Equity both 10,000.00, Margin 0.00, Free margin 10,000.00, Margin level — and Leverage 1:100.
    Open this in the terminal (opens in a new tab)

0 of 3 questions right. Answer them all to complete the lesson.