The #1 reason traders blow their accounts isn't bad strategy — it's bad position sizing. Risk too much on one trade and a single loss can wipe out weeks of gains. The 1% Rule fixes this permanently.
What Is the 1% Rule?
The 1% Rule is simple: never risk more than 1% of your total account on any single trade. That's it. If your account is $10,000, your maximum loss on any trade is $100.
This doesn't mean you only invest 1% of your capital. It means your stop loss is placed so that if the trade goes against you and hits your stop, you lose no more than 1% of your account.
With the 1% rule, you can have 100 consecutive losing trades and still have 36% of your account left. With 10% risk per trade, 10 consecutive losses wipes you out completely.
The Math That Will Change How You Trade
| Risk Per Trade | After 10 Losses | After 20 Losses | After 50 Losses |
|---|---|---|---|
| 1% | $9,044 | $8,179 | $6,050 |
| 2% | $8,171 | $6,676 | $3,642 |
| 5% | $5,987 | $3,585 | $769 |
| 10% | $3,487 | $1,216 | $52 |
| 20% | $1,074 | $115 | ~$0 |
Starting account: $10,000. Assumes all losses, no wins.
A trader risking 10% per trade only needs 10 consecutive losses to lose 65% of their account. Losing streaks of 10+ trades are completely normal — even for profitable traders.
Live Position Size Calculator
Use this calculator to find the exact position size for your next trade:
Position Size Calculator
How to Apply the 1% Rule Step by Step
- Determine your account size — use your current total balance, not just the margin available.
- Calculate your max risk — multiply account size by 0.01 (1%). On $10,000 that's $100.
- Set your stop loss first — place it at a technically valid level, not based on how much you want to risk.
- Calculate the distance — entry price minus stop loss price = risk per unit.
- Divide max risk by distance — $100 ÷ $5 = 20 units/shares/contracts.
- Enter the trade — with exactly that position size. No more, no less.
The Profit Journal's built-in risk calculator does all this math for you automatically. Just enter your account size, risk %, and stop loss — get the exact position size instantly.
Common Mistakes with the 1% Rule
- Risking 1% but taking 10 trades at once — your total portfolio risk is now 10%. Limit simultaneous trades.
- Moving your stop loss — this invalidates the entire rule. Your stop is sacred.
- Using 1% on a tiny account — 1% of $500 is $5. That's fine — grow the account first, don't increase risk %.
- Forgetting about correlated trades — two long trades on BTC and ETH are essentially one trade. Count them together.
- Not adjusting after drawdowns — if your account drops to $8,000, your 1% is now $80, not $100. Recalculate every trade.
The Bottom Line
The 1% Rule isn't exciting. It won't make you rich overnight. But it will keep you in the game long enough to become consistently profitable — and that's the only thing that matters.
Every professional trader, every prop firm, every hedge fund uses strict position sizing rules. The 1% Rule is the simplest and most effective version of this principle for retail traders.
Track every trade with proper risk management. The Profit Journal logs your position sizes, calculates your actual risk per trade, and alerts you when you're overexposed. Free to start.