Risk per trade
How much money you are willing to lose on one trade. Counted as a percentage of the account, not as position size.
Risk per trade — what it is?
Risk per trade is the share of the account you are willing to risk in one go. It is set in advance, in percent, and does not change with how confident you feel about the trade.
The standard reference point is one percent. At that level a run of ten losses in a row costs about a tenth of the account: unpleasant, but not fatal.
The rule's main function is psychological rather than financial. Losing one percent does not make you want to win it back — and that urge is exactly what destroys accounts.
- Account — 100 000 ₸ — everything you have on the trading account
- 1% risk — 1 000 ₸ — what you lose if the stop-loss triggers
- 2% risk — 2 000 ₸ — the upper sensible limit, above that it gets dangerous
- 10% risk — 10 000 ₸ — ten losses in a row and the account is gone
- Takeaway — You fix the percentage once and do not change it after a loss
Risk per trade — how it is built?
The percentage is fixed in the trading plan and stays the same for every trade. Position size is calculated from it and from the distance to the stop-loss. Confidence in a trade does not affect the risk size — subjective confidence and probability are only weakly related.
Risk per trade — common mistakes
Raising the risk on "obvious" trades.
Increasing size after losses.
Counting risk in money instead of percent.
Opening several correlated positions with full risk in each.
Related to
Glossary
- point
- the minimum step of a quote, usually ten times smaller than a pip.
- stop-loss
- an exit level set in advance for a losing trade.
- trading plan
- a set of rules written down in advance: entry conditions, risk per trade, minimum R:R, trade limit.
- position size
- the size calculated so that the stop being hit costs a set percentage of the account.
- position
- an open trade.