Risk per trade and the 1–2% rule
Why careful traders risk only 1–2% of their account per trade, with worked numbers showing how small risk survives losing streaks.
Risk management is the set of rules that controls how much you can lose. It is the most important skill in trading, because nobody wins every trade. Studies of retail traders, such as the European regulator ESMA's finding that 74–89% of retail CFD accounts lose money, show how hard trading is. Good risk rules do not make you profitable, but they stop a bad week from ending your journey.
What "risk per trade" means
Risk per trade is the amount of money you lose if a trade hits your stop-loss, the price where you have decided to exit because your idea was wrong. It is not the size of the position. You could buy 2,000 dollars' worth of a coin and only risk 100 dollars, if your stop-loss is close enough.
The 1–2% rule
A widely used guideline is to risk no more than 1% to 2% of your account on any single trade. Many beginners are better off at 1% or less. With a 10,000 account, 1% is 100 and 2% is 200.
This sounds tiny, and that is the point. Losing streaks are normal. Even a decent strategy can lose 5, 8 or 10 times in a row by pure chance.
Two traders each start with 10,000 and both lose 10 trades in a row.
- Trader A risks 1% of the current balance each time. After 10 losses, the account is about 9,044 (10,000 × 0.99 to the power of 10). That is a drawdown of under 10%. Annoying, but fully recoverable.
- Trader B risks 10% each time. After 10 losses, the account is about 3,487 (10,000 × 0.9 to the power of 10). Trader B has lost about two thirds of the account and now needs to almost triple it just to get back to the start.
Why small risk is a superpower
- You survive long enough to learn from your mistakes.
- Each loss stays small enough that you can think calmly.
- You avoid "revenge trading," which means taking bigger risks to win back losses quickly.
Only money you can afford to lose
The 1% rule applies to your trading account. That account itself should only hold money you could lose completely without hurting your rent, bills, savings or sleep. Crypto can fall sharply and quickly, and platforms can fail, as the FTX collapse in November 2022 showed.
Your practice wallet at /app/trade holds 10,000 virtual USD (no real value). Set yourself a rule of 100 practice dollars of risk per trade and keep it for your next 20 practice trades.
A free account tracks lessons, unlocks the quizzes and gives you 10,000 virtual USD (no real value) to practise with.