Risk Management 101: Position Sizing & the 1% Rule

Most blown accounts aren't killed by bad entries — they're killed by size. You can be right 60% of the time and still go broke if your losers are five times bigger than your winners. Risk management is the discipline of making sure no single trade, and no single bad day, can take you out.

The 1% rule

Risk a fixed, small fraction of your account on each trade — commonly 1% (conservative traders use 0.5%, aggressive ones 2%). If your account is €10,000 and you risk 1%, the most you lose on a trade is €100, no matter how confident you feel.

The power of a fixed fraction is that it scales with your account: you risk more as you grow and automatically less when you're in a drawdown.

Sizing a trade in three steps

• 1. Decide your risk per trade in money: account × risk% (e.g. €10,000 × 1% = €100).
• 2. Measure your stop distance in price: |entry − stop loss|.
• 3. Position size = risk money ÷ stop distance. A wider stop means a smaller position; a tighter stop allows a larger one. Your risk in euros stays constant.

Try it — change the inputs and watch the position size update:

The size adjusts automatically so your euro risk stays fixed no matter how wide or tight the stop.

Why this changes everything

When every trade risks the same fraction, your results become a game of expectancy over many trades, not a desperate bet on the next one. A losing streak becomes a shallow dip instead of a crater, and you stay in the game long enough for your edge to play out.

In FSP, set your starting equity in Settings and attach a stop loss to each trade so the app can compute your R-multiple — the single best way to see whether your sizing is actually consistent.