How much to risk per trade
A widely used rule: never risk more than 1-2% of your total account on a single trade. On a $500 account, that's $5-$10 per trade, not $200.
This isn't about being scared of losing — it's about surviving long enough to let a good strategy actually prove itself. A string of losses that would end a reckless account barely dents one following this rule.
Position size, not confidence, should decide how much you risk. If you're not sure how big to trade, that alone is a sign you're not ready to trade live yet.
The 1-2% rule isn't arbitrary caution — it's math. Losing 10 trades in a row at 2% risk each costs about 18% of an account, still very recoverable. Losing 10 trades in a row at 10% risk each costs nearly the entire account, and losing streaks of 10 are far more common over a trading career than most beginners expect.
Risk percentage should also flex down, never up, during a rough patch. If you're on a losing streak, cutting size further — even below your normal 1% — while you figure out what's going wrong protects you from a small problem becoming an account-ending one.
Key takeaway
Small, consistent risk per trade is what lets you survive the losing streaks every trader eventually has.
Example
On a $500 account risking 1%, that's $5 per trade. Ten losses in a row — rare, but possible — costs $50, about 10% of the account. Survivable. Risking $50 a trade instead, that same streak wipes the account out completely.
Try this
Work out exactly what 1% and 2% of your current (or planned) account size is in real currency. Write both numbers down somewhere visible.
This lesson is part of the free TDWK Academy — 40 lessons from zero to funded trader, with progress tracking and a certificate exam.
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