The 1-2% rule

Risk & Position Sizing

A hard cap on any single trade

The 1-2% rule says risk no more than 1-2% of your account on any single trade. On a $10,000 account, 1% risk means risking exactly $100, no matter how confident you feel.

A percentage, not a fixed dollar figure

The rule caps risk at a fixed percent, not a fixed dollar amount, so the actual dollar risk shrinks automatically after a losing streak and grows after the account compounds up.

Confidence isn't a reason to break it

Confidence in a setup is not a reason to break the rule. The trader who risks 5% on their best idea ever is one bad trade away from a hole that takes many wins to climb back out of.