What is risk per trade?
In one line: Risk per trade is the amount you'd lose if a trade hits its stop loss, usually set as a small fixed percent of your account, such as 1%.
A simple example
Your account is $4,000. You choose to risk 1% a trade: $40.
You want to buy a stock at $30.00. The chart puts your Stop loss at $29.20, just past the last place price turned around. That's $0.80 a share.
Position size = $40 ÷ $0.80 = 50 shares.
If the stop is hit, you lose about $40, before any slippage. The stop came from the chart. The size came from the math.
Same risk, different stops
| Stop distance | Risk | Size |
|---|---|---|
| $0.40 | $40 | 100 shares |
| $0.80 | $40 | 50 shares |
| $2.00 | $40 | 20 shares |
Wider stop, smaller size. The risk stays the same every time. The position size calculator does this in seconds.
Why it matters
Losing streaks happen to every method. Fixed small risk keeps them survivable.
At 1% a trade, ten losses in a row cost you roughly 10% of the account. At 10% a trade, the same streak can take most of it. A math example, not a forecast. Check streaks for yourself with the losing streak calculator.
Small fixed risk also makes your results comparable. You can measure every trade in units of risk, or R-multiples.
A common mistake
Picking the size first, then the stop. "I'll buy 200 shares" and then squeezing the stop to fit is backwards. The stop ends up where the money is comfortable, not where the chart says the idea is wrong.
Order of work: stop from the chart, risk from your rule, size from the math. Then a daily loss limit caps the day, like two losses and done.
The full guide is how much to risk per trade.
Questions
What is the 1% rule in trading?
Risking no more than about 1% of your account on any single trade, so a loss is small and a losing streak is survivable.
Is risk per trade the same as position size?
No. Risk is what you'd lose at the stop. Position size is how many shares, lots or contracts you buy to keep that risk fixed.
Should I risk more on a trade I'm sure about?
Most risk plans keep it fixed. Feeling sure doesn't change the odds, and the biggest losses often come from the trades people felt surest about.
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