Risk first: the 1% rule and position size
The math that keeps you in the game: how much to risk per trade and how many shares that means.
7 min read
The traders who last aren't the ones who pick the most winners. They're the ones who keep losses small. That starts before you ever click buy: decide how much you're willing to lose on this trade.
The 1% rule
Many traders risk around 0.5% to 2% of their account on any one trade. With 1%, a $5,000 account risks $50 per trade. Ten losses in a row (it happens) costs about 10%, not the whole account.
Position size
Your position size comes from your risk and your stop, not from how confident you feel:
Shares = money at risk ÷ (entry − stop)
- Account
- $5,000
- Risk 1%
- $50
- Entry
- $40.00
- Stop
- $39.00
- Risk per share
- $1.00
- Position size
- 50 shares
If the stop hits, you lose about $50 (plus any slippage). A wider stop means fewer shares; a tighter stop means more.
Key takeaways
- ✓Decide the loss before the trade.
- ✓Risk a small, fixed % per trade.
- ✓Shares = risk ÷ (entry − stop).
Quick check
You have $10,000 and risk 1%. Entry $25, stop $24.50. How many shares?
Put it into practice
Put in your account, risk %, entry and stop. It does the math and shows your 1R, 2R and 3R targets.
Education only, not financial advice. Trading involves substantial risk of loss.