What Is the 1% Rule?
The 1% rule is one of the most fundamental risk management principles in forex: never risk more than 1% of your total capital on a single trade. With a $10,000 account, the maximum acceptable loss on any trade is $100.
Why 1% and Not 5% or 10%?
Mathematics is brutal to those who ignore risk:
- At 1%: 10 consecutive losses → capital drops to $9,044 (-9.6%)
- At 5%: 10 consecutive losses → capital drops to $5,987 (-40.1%)
- At 10%: 10 consecutive losses → capital drops to $3,487 (-65.1%)
A 10-loss streak is completely normal. At 1% risk you survive. At 10% you may be undercapitalized before the strategy shows its potential.
The 1% Rule and Prop Firms
With a 10% drawdown limit and 1% per trade, you need 10 consecutive losses to reach the maximum limit. At 2% per trade, just 5 losses suffice. The 1% rule aligns perfectly with leading prop firm requirements.
Monitoring Your Adherence to the Rule
ForexTracker displays the percentage risk per logged trade, highlighting any trade where you exceeded the limit. With this visibility, you quickly identify when your risk discipline is slipping.
Monitor your risk management with ForexTracker. Access app.forextracker.com.br for free.