The 1% Trading Rule – Mastering Risk Management in less than 9 Minutes
How capital survives long enough to grow
Most traders fail for a simple reason:
They risk too much.
One bad week can erase months of progress.
One revenge trade can cut an account in half.
This isn’t about charts or indicators — this is risk math.
The rule that protects against ruin?
Never risk more than 1% of your capital on a single trade.
Why Small Risk Wins
If you risk 10% per trade, just 10 losses in a row can destroy you.
If you risk 1% per trade,
it would take 100 losses in a row to blow your account —
a probability close to zero even with a poor strategy.
Losses are not symmetrical:
| Capital Loss | Required Gain to Recover |
|---|---|
| −10% | +11% |
| −30% | +43% |
| −50% | +100% |
| −65% | +185% |
| −90% | +900% |
The deeper the hole,
the more mathematically impossible recovery becomes.
The goal is not to maximize returns —
it’s to stay alive long enough to compound.
The 1% Rule Formula
Position size is determined by:
Dollar Risk ÷ Stop Distance = Position Size
Example:
- $10,000 account
- 1% risk = $100
- Stop distance = 20 pips
→ 5 per pip (≈ 5 mini lots in FX)
Your risk stays fixed.
Your position adjusts to volatility.
This scales perfectly:
| Account Size | 1% Risk | Position Sizing Logic |
|---|---|---|
| $5,000 | $50 | Small sizing |
| $10,000 | $100 | Moderate sizing |
| $50,000 | $500 | Larger sizing |
Confidence doesn’t change position size — risk math does.
A Practical Trade Example
- Account: $10,000
- Risk: 1% = $100
- Stop loss: 30 pips
- Target: 90 pips (3R)
→ 3.33 per pip (~3 mini lots)
If wrong: −1%
If right: +3%
That is asymmetry working in your favor.
A trader risking 5% on the same trade?
A short losing streak becomes catastrophic.
Survival beats aggression.
The Real Problem: Behavior
Overconfidence causes:
- Oversizing
- Overtrading
- Revenge positions
- “I’ll make it back” thinking
Risk rules prevent psychology from destroying edge.
Discipline is the real leverage.
A Simple Operating Order
1️⃣ Survival
2️⃣ Consistency
3️⃣ Profit
Risking 1–2% per trade
lets skill compound instead of being erased by variance.
Action Step
Calculate this now:
Max Risk per Trade = Account Size × 1%
Write it down.
Obey it.
No exceptions.
Your edge does not work if you are not there to realize it.
Visual Breakdown — Video Edition
These lessons are part of my ongoing public research on
Risk1Reward3.
Risk Management — The 1% Rule
Next: → Position Sizing
See also: Position Sizing