Risk per trade refers to the maximum amount of capital you're willing to lose on a single trade, expressed as either a dollar amount or percentage of your total account.
Position Size = (Account Risk) / (Entry Price - Stop Loss Price)
| Component | Description |
|---|---|
| Account Size | Total trading capital |
| Risk Percentage | 1-2% recommended |
| Entry Price | Purchase price |
| Stop Loss | Exit price if trade moves against you |
Proper risk calculation protects your capital and keeps you in the game. By consistently applying the 1% rule and precise position sizing, you ensure no single trade can significantly damage your account.
