Risk
Risk per trade
The share of the account lost if the stop is hit. One to two percent is a convention.
Arithmetic
True by construction. No market data is needed to know it.
The link between size and survival is arithmetic. The specific 1-2% figure is convention.
What it is
Risk per trade is set before the trade and fixes the size: dollars at risk divided by stop distance.
What it suggests
Small fractions survive long losing streaks that larger ones do not (see risk-of-ruin). The one-to-two percent figure is common practice. No peer-reviewed source for it was found, and it is not a tested optimum.
How to check it
Set the percent in the plan, size every trade from it, and never raise it because of a recent win.
Common mistakes
- Raising size after wins.
- Counting risk in pips instead of dollars.
Sources
- Position-sizing convention (percent-risk sizing popularized by Van Tharp); no peer-reviewed source found for a 1-2% figure (citation and headline finding only)
- The Exchange's own seeded simulation in src/risk-math.mjs (illustrative: real trading has streaks, gaps and slippage the simulation ignores) (abstract or primary page read)
Related lessons
Written in our own words. Education only, not financial advice.