How much to risk per trade: the 1% rule and how to calculate position size
Most accounts don’t get emptied by picking the wrong pair or the wrong direction, but by risking too much on each trade. If you decide beforehand how much you can lose and calculate the size from there, a losing streak is a bad month and not the end. This is the maths.
By Bárbara Ruiz·Updated ·3 min read
The 1% rule
It’s a very widespread risk management rule: don’t lose more than 1% of your account on a single trade. Some traders use 0.5% or 2%; the exact number is up to you. What matters is that it’s small and that you decide it before you enter.
Careful: it doesn’t mean putting 1% of your account into each trade. It means that, if the stop is hit, you lose 1%. The position can be much larger.
How to calculate the position size
The position size comes from dividing what you are willing to lose by the distance to your stop. With a 2,000 USDT account, a 1% risk and the stop 2% from the entry, the position is 1,000 USDT. Step by step:
- Risk in USDT = account × percentage. With 2,000 USDT and 1%: 20 USDT.
- Distance to the stop = (entry − stop) ÷ entry. Entry at 60,000, stop at 58,800: 1,200 ÷ 60,000 = 2%.
- Position size = risk ÷ distance. 20 ÷ 0.02 = 1,000 USDT, about 0.0167 BTC.
- Margin = size ÷ leverage. At x5, 200 USDT; at x10, 100 USDT.
If the stop is hit, you lose 20 USDT (plus fees) at x5 just as at x10. Leverage has only decided how much money stays locked up as margin.
Always check that your stop sits before the liquidation price. With a stop 2% away and x50, liquidation would come before the stop.
Why the percentage matters so much
The percentage you risk decides how much you have left after a bad streak, and losing streaks happen to everyone, even with a good method. After ten losses in a row, risking 1% you keep 90% of the account; risking 10%, only 35%:
| Risk per trade | Account after 10 losses in a row |
|---|---|
| 1% | 90.4% |
| 2% | 81.7% |
| 5% | 59.9% |
| 10% | 34.9% |
Recovering is harder than losing: after losing half, you need to double what’s left just to get back to where you started.
The gain is calculated on a smaller account:
| If you lose | To get back to where you started, you need to make |
|---|---|
| 10% | 11.1% |
| 25% | 33.3% |
| 50% | 100% |
| 75% | 300% |
What breaks the rule without you noticing
The fixed-percentage rule breaks without you noticing when you open several positions that move together, move the stop after entering, forget fees and funding, or raise the risk to win it back. Each of these increases what you are really risking.
- Several positions at once in coins that move together. Five longs at 1% in altcoins that all fall with Bitcoin are, in practice, 5%.
- Moving the stop after entering: you change the distance and, with it, the risk.
- Forgetting fees and funding, which add to the loss. More detail in maker and taker fees and in funding rate.
- Raising the risk to win it back after a bad streak. It’s the shortest road to an empty account.
Frequently asked questions
What is the 1% rule in trading?
Not losing more than 1% of your account on a single trade if the stop loss is hit. The position size is calculated from that limit.
How do you calculate a position size?
Divide what you are willing to lose in USDT by the distance to the stop, as a decimal. With 20 USDT of risk and a stop 2% away, the position is 1,000 USDT.
Does leverage increase the risk?
If you keep the same position size and the same stop, no: you lose the same amount if the stop is hit. What it does is bring liquidation closer and make it easier to open positions that are too large.