Risk Management: The 1–2% Rule and the Maths of Account Survival
Why risk is measured in percent, what a losing streak does to an account, and how much you must make back to recover a 50% drawdown.
Risk management is not about caution, it is about arithmetic. It answers one question: how many consecutive mistakes can your account absorb and still recover.
The 1–2% rule
Risk per trade should not exceed 1–2% of the account. On $2,000 that is $20–40.
What it means over a sample:
| Risk per trade | 10 losses in a row | Account remaining |
|---|---|---|
| 1% | −9.6% | 90% |
| 2% | −18.3% | 82% |
| 5% | −40% | 60% |
| 10% | −65% | 35% |
Ten losses in a row is not exotic. At a 50% win rate such a streak appears roughly once every thousand trades — once or twice in an active year.
Why drawdowns are so hard to recover
| Drawdown | Gain required |
|---|---|
| 10% | +11% |
| 25% | +33% |
| 50% | +100% |
| 80% | +400% |
Losing half the account means you have to double it. Which is why experienced traders are obsessed with the size of the loss rather than the size of the win.
Daily and weekly caps
Beyond per-trade risk, set a daily ceiling (typically 3–4%) and a weekly one (6–8%). Reach it and stop until the next period. This single rule works against the only genuinely dangerous behaviour: trying to win it back immediately with bigger size.
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Frequently asked questions
How much can I risk per trade?
The standard is 1–2% of the account. At 2%, ten consecutive losses cost about 18% — survivable. At 10%, the same ten losses leave you with a third of the account.
What are daily and weekly risk limits?
Additional caps — for example 4% a day and 8% a week. Hit the limit and you close the terminal. They exist to stop revenge trading.
How much do I need to recover a drawdown?
A 10% drawdown needs +11%, 25% needs +33%, 50% needs +100%, and 80% needs +400%. The relationship is non-linear, which is the main argument for small risk.
- Min. deposit
- $50
- Spread
- from 1.0 pip (Standard STP)
- Commission
- $3 per lot per side (Raw ECN)
CFDs are complex instruments with a high risk of losing money
- Min. deposit
- $100
- Spread
- from 1.1 pips (Standard STP)
- Commission
- $3 per lot per side (Raw ECN)
CFDs are complex instruments with a high risk of losing money