Position Size: 10% of Your Account: This is about trade allocation, not risk. Good traders never dump their entire account into one position. Instead, they cap their position size at 10% of their total account. If you have $10,000, that means putting no more than $1,000 into any single trade.
Risk Per Trade: Never More Than 1% This is the golden rule of survival. No matter how confident you are, the maximum you should lose on any one trade is 1% of your account. For a $10,000 account, that’s just $100. Why? Because even if you lose five trades in a row, you’re still down only 5%—and you’re in the game long enough for your edge to pay off. This simple rule protects your capital and your mindset.
50% Win Rate with a 1:2 Risk-Reward Ratio: You don’t need to be right most of the time to be profitable. If you win just 50% of your trades but make twice as much on your winners as you lose on your losers, the math works beautifully in your favor.
70% Win Rate with a 1:1 Risk-Reward Ratio: A strategy with a 70% win rate and a 1:1 risk-reward ratio can be surprisingly effective.
