Position sizing and the 1% rule

Most accounts don't blow up because the trader was wrong — they blow up because one trade was too big. Position sizing is the habit that makes being wrong survivable.

The 1% rule

Risk no more than 1% of your account on any single trade. Not 1% of the position — 1% of the whole account, measured as the distance to your stop.

On a $10,000 account, that's $100 of risk per trade. You can lose 10 in a row and still have ~90% of your capital. That's the whole point: stay in the game long enough for your edge to play out.

How to size a position from your stop

The formula is simple:

position size = (account × risk%) ÷ (entry − stop)

Example: $10,000 account, 1% risk = $100. You buy at $50 with a stop at $48 (a $2 risk per unit):

$100 ÷ $2 = 50 units

So you buy 50 units. If the stop hits, you lose $100 — exactly 1%. The stop distance, not a gut feeling, decides the size.

Why it matters more than your win-rate

A trader risking 1% with a mediocre 45% win-rate will quietly compound. A trader risking 10% with a great 60% win-rate is one bad streak from zero. Risk control isn't the boring part of trading — it's the part that decides whether you have a career or a story.

Next

Pair this with the backtest lesson in the Strategies track: drawdown tells you how rough a strategy gets, and the 1% rule tells you how to size it so that roughness never ends your run.