Stop Blowing Your Account
Stop Blowing Your Account: Use the 1% Rule
You've found a profitable strategy. You get a few wins, and your account grows. You start to feel confident, maybe even a little invincible.
But you don't use position sizing. You trade big sizes randomly. A sudden 4-trade losing streak hits, and you lose 30% of your account in a single week. You are emotionally drained.
How can you trade your system reliably for months without one bad week destroying your capital and confidence?
Use the 1% Risk Rule. This means you only risk 1% of your total trading account on any single trade. If you have a $5,000 account, you only risk $50 (1%) per trade. If you lose, you lose $50.
It takes 100 straight losing trades to blow that account. The math protects you. This isn't about profit. It's about staying in the game long enough for your winners to show up. Always calculate your exact lot size before you hit the "buy" or "sell" button.
How do I calculate my position size?
A: First, set your risk (e.g., $50). Then, measure your stop loss size in pips. Finally, use a position size calculator. It will tell you the exact lot size to use.
Q: Why not risk 5%?
A: If you lose five 5% trades in a row, you've lost 25% of your account. That requires huge gains just to get back to break-even. Risking 1% makes losses manageable.
Q: Is 1% too small for a small account?
A: No. If you have a small account, risk 1%. Focus on consistency. Trading with low risk is how you build good habits that work when your account is large.
