1 Percent Risk Rule Calculator

1% Risk Rule Formula:

\[ Position\ Size = \frac{Account \times 0.01}{Stop\ Loss\ \%} \]

Position Size:

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1. What is the 1 Percent Risk Rule?

The 1 Percent Risk Rule is a fundamental risk management principle in trading that limits risk exposure to no more than 1% of total account capital on any single trade. This helps preserve capital and prevent catastrophic losses.

2. How Does the Calculator Work?

The calculator uses the 1% risk rule formula:

\[ Position\ Size = \frac{Account \times 0.01}{Stop\ Loss\ \%} \]

Where:

\( Position\ Size \) — Maximum position size in currency units
\( Account \) — Total account balance in currency
\( Stop\ Loss\ \% \) — Stop loss percentage as decimal (e.g., 2% = 0.02)

Explanation: The formula calculates the maximum position size that would result in exactly 1% of account capital being risked based on the stop loss percentage.

3. Importance of Risk Management

Details: Proper risk management is crucial for long-term trading success. The 1% rule helps traders survive losing streaks and maintain consistency in their trading approach.

4. Using the Calculator

Tips: Enter your total account balance and the percentage stop loss for your trade. The calculator will determine the appropriate position size to maintain 1% risk exposure.

5. Frequently Asked Questions (FAQ)

Q1: Why use 1% risk per trade?
A: 1% risk allows traders to withstand multiple consecutive losses without significant account damage, providing psychological comfort and long-term sustainability.

Q2: Can I risk more than 1%?
A: While possible, risking more than 1-2% per trade significantly increases the probability of large drawdowns and potential account blow-up during losing streaks.

Q3: How do I determine stop loss percentage?
A: Stop loss should be based on technical analysis (support/resistance levels) or volatility measures, not arbitrary percentages.

Q4: Does this work for all markets?
A: Yes, the 1% rule applies to stocks, forex, crypto, and other markets, though position sizing calculations may vary for leveraged instruments.

Q5: Should I adjust risk based on market conditions?
A: Some traders reduce risk during high volatility or uncertain market conditions, and increase during favorable conditions with high-probability setups.