Lesson 20 of 69
Position sizing and the 1% rule
7 min read
Chapter checkpoints
0/3- Step 1 — choose your risk per trade
- Step 2 — measure the stop, then size the trade
- Risk across the whole account
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is the mechanism that converts your risk rule into an actual number in the box. It is the single most useful calculation in trading, and it takes about fifteen seconds once you know it.
Step 1 — choose your risk per trade
- Beginners: 0.5–1% of account per trade.
- Experienced with a proven edge: up to 2%.
- Never more than 2%, regardless of how good the setup looks.
Step 2 — measure the stop, then size the trade
Volume = risk amount ÷ (stop distance in × pip value per ). Work an example: a $3,000 account risking 1% is $30. A gold trade with a 60- stop, where a standard lot of gold is roughly $10 per pip, gives 30 ÷ (60 × 10) = 0.05 .
| Account | Risk 1% | Stop | Volume (EUR/USD) |
|---|---|---|---|
| $500 | $5 | 25 pips | 0.02 lots |
| $1,000 | $10 | 50 pips | 0.02 lots |
| $5,000 | $50 | 40 pips | 0.12 lots |
| $10,000 | $100 | 80 pips | 0.12 lots |
Position Size Calculator
Enter your balance, risk percentage and stop distance to get the exact lot size — no arithmetic required.
Wider stop, smaller size
A wide stop is not riskier than a tight one if you size correctly — it just means fewer lots. This frees you to place the stop where the chart says it belongs instead of where your wants it.
Risk across the whole account
- Cap total risk at around 3–5%, no matter how many positions.
- trades count as one trade: long EUR/USD, long GBP/USD and short USD/CHF is a single large short-dollar bet.
- Consider a daily stop — for example, stop trading after 2 losses or -3% on the day.
Key takeaways
- Risk a fixed small percentage — commonly 1% — of the account per trade.
- Lot size comes from risk amount divided by stop distance, never from habit.
- Wider stops mean smaller positions so the money at risk stays the same.
- Use a position size calculator until the maths becomes second nature.
Knowledge check
3 quick questions — your best score is saved to your progress.
1. What does the 1% rule say?
2. Position size is calculated from…
3. If your stop must be wider than usual, what should happen to your lot size?
Progress is saved on this device.
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