The difference between traders who last and traders who blow up their accounts is rarely strategy — it is risk management. Even the best strategies have losing streaks. Your job is to make sure no streak can knock you out of the game.
The 1% rule
Never risk more than 1–2% of your account on a single trade. With a $10,000 account and 1% risk, your maximum loss per trade is $100. Even ten losses in a row would leave you with roughly $9,044 — painful, but recoverable.
| Risk per trade | Account after 10 straight losses |
|---|---|
| 1% | $9,044 |
| 2% | $8,171 |
| 5% | $5,987 |
| 10% | $3,487 |
Position sizing step by step
- Decide your risk amount: account balance × risk % (e.g. $10,000 × 1% = $100).
- Set your stop loss based on the chart, not on money (e.g. 25 pips).
- Calculate the pip value you need: $100 ÷ 25 pips = $4 per pip.
- Convert to lots: $4 per pip on EUR/USD = 0.4 lots.
Our free position size calculator does this instantly for any pair.
Risk/reward ratio
Aim for trades where the potential reward is at least 1.5–2× the risk. With a 1:2 risk/reward ratio, you can be wrong 60% of the time and still break even. Use the Fibonacci calculator and pivot points to plan realistic targets.
Other essential rules
- Always use a stop loss. Decide where you are wrong before you enter.
- Avoid over-leverage. High leverage is a tool, not a target.
- Limit daily losses. Stop trading after losing 3% in a day.
- Keep a journal. Track every trade, emotion and mistake.
- Mind correlation. Long EUR/USD and long GBP/USD is almost the same trade twice.
Compounding small, consistent gains is powerful — see what it can do with the compounding calculator.