The 1% Rule in Forex: How Much to Risk Per Trade
Risk no more than 1-2% of your account on any single trade. Here's why the math works.
Researched and written by Laurent The Recovery Math
The most important table in trading:
| Account Drawdown | Gain Required to Recover |
|---|---|
| 5% | 5.3% |
| 10% | 11.1% |
| 20% | 25.0% |
| 30% | 42.9% |
| 40% | 66.7% |
| 50% | 100.0% |
| 75% | 300.0% |
| 90% | 900.0% |
At 50% drawdown, you need to double your remaining capital just to break even. Most traders never recover from a 50% drawdown. They quit, reset, or blow the rest trying to recover.
Why 1-2% Works
At 1% risk per trade, the math protects you:
- 5 consecutive losses: ~5% drawdown. Need 5.3% to recover. Easy.
- 10 consecutive losses: ~10% drawdown. Need 11.1% to recover. Uncomfortable but manageable.
- 20 consecutive losses: ~18% drawdown. Extremely unlikely (even a 40% win rate strategy has a <0.01% chance of 20 losses in a row). Need 22% to recover.
At 2% risk, double these drawdowns. Still survivable, but the margin for error is thinner. For beginners, 1% is recommended. Move to 2% only after demonstrating consistency over at least 50 live trades.
Maximum loss per trade: $100
After 10 losers in a row: account is ~$9,044 (not $9,000, because each loss is 1% of the declining balance)
Need 10.6% gain to recover, roughly $956. With $100 risk per trade and 1:2 RR ($200 per winner), that's about 5 winning trades.
What 1% Risk Does NOT Do
The 1% rule does not limit your profit. It limits the speed at which you can lose. Your winning trades can still be 2%, 3%, or 5% of your account if your risk-reward is favorable. The rule only constrains how much you can lose on any single trade idea that turns out to be wrong.
Key Takeaways
- • 1% risk per trade: after 10 consecutive losers, you've lost ~10%. Painful but recoverable.
- • 5% risk per trade: after 10 consecutive losers, you've lost ~40%. You need 67% gain to recover.
- • 10% risk per trade: after 10 losers, you've lost ~65%. You need 186% gain to recover. Nearly impossible.
- • The 1-2% rule doesn't limit your profit potential; it limits the speed at which you can lose.