Level 3 · Lesson 7 of 12 · 6 min read
Forex Position Sizing: The 1% Rule for Beginners
The simple formula that keeps your account alive.
Researched and written by Laurent The 1% Rule
Before every trade, you need to answer one question: "How much am I willing to lose on this trade?"
The answer should be 1-2% of your account balance. No more. Here's what that looks like:
| Account Balance | 1% Risk | 2% Risk |
|---|---|---|
| $500 | $5 | $10 |
| $1,000 | $10 | $20 |
| $5,000 | $50 | $100 |
| $10,000 | $100 | $200 |
The Formula
Lot Size = Risk Amount / (Stop-Loss in Pips x Pip Value)
Let's work through a real example:
Account:
$1,000
Risk %:
1% = $10 max loss
Pair:
EUR/USD
Stop-loss:
25 pips
Pip value (micro):
$0.10 per pip per micro lot
Lot size:
$10 / (25 x $0.10) = $10 / $2.50 = 0.04 lots
Verification:
25 pips x 0.04 lots x $0.10/pip = $10 loss if SL hit ✅
Why This Matters: The Survival Math
At 1% risk per trade, even a terrible losing streak is survivable:
| Consecutive Losses | Account After (1% risk) | Account After (5% risk) | Account After (10% risk) |
|---|---|---|---|
| 5 losses | $951 | $774 | $590 |
| 10 losses | $904 | $599 | $349 |
| 15 losses | $860 | $463 | $206 |
| 20 losses | $818 | $358 | $122 |
At 1% risk, even 20 consecutive losses (extremely unlikely) only costs 18% of your account. At 10% risk, you're nearly wiped out. This is why position sizing is the single most important skill after Level 1 basics.
Use a calculator. Don't do this math in your head before every trade. Use our Position Size Calculator (linked at the end of this lesson). Speed matters when a setup appears.
Key Takeaways
- • The rule: never risk more than 1-2% of your account on a single trade.
- • Formula: Lot size = Risk amount / (Stop-loss pips x Pip value).
- • With a $1,000 account risking 1%, your max loss per trade is $10.
- • Even 10 losses in a row only costs 10% of your account. Survivable.