How much to risk per trade
'Risk' here means the money you lose if the trade hits your stop - not the size of the position. Getting this one number right decides whether a normal losing streak is annoying or account-ending.
The common rule: 0.5% to 2%
Many trading books and courses suggest risking about 1% of your account per trade, and many new traders start at 0.5%. With ₹2,00,000 or $5,000, 1% is ₹2,000 or $50 per trade. This is a habit, not a law - but it is popular for a simple reason: losing streaks are longer than people expect.
Losing streaks are normal
We simulated 100 trades many thousands of times with no edge either way, to see how often a long losing streak turns up:
| Win rate | Chance of 5+ losses in a row | 8+ in a row | 10+ in a row |
|---|---|---|---|
| 40% | 98% | 49% | 21% |
| 50% | 81% | 17% | 4% |
| 60% | 46% | 4% | 0.7% |
Our own simulation, 20,000 runs of 100 trades each. Real trades are not perfectly independent, so streaks can be longer.
If you win 40% of the time (common for trend strategies), a streak of 8 losses in 100 trades is about a coin flip. At 1% risk that costs about 8%. At 5% risk it costs about a third of the account.
What each level means after 10 losses in a row
| Risk per trade | Account left after 10 straight losses |
|---|---|
| 0.5% | 95.1% |
| 1% | 90.4% |
| 2% | 81.7% |
| 5% | 59.9% |
| 10% | 34.9% |
And remember the recovery maths: a fall of 40% needs a gain of 66.7% just to get back to where you started.
How to choose your own number
- Start with your worst normal streak. Look at your past trades (or the backtest) and find the longest losing run. Assume the next one is longer.
- Decide the fall you could live through. For example, 15% of the account without changing how you trade.
- Divide. 15% / 12 losses ≈ 1.25%. Round down.
- Add a daily loss limit. Many traders stop for the day after 2-3% down. In prop challenges, stopping at about 60% of the daily limit cut breaches sharply in our tests on simulated accounts.
- Count charges and slippage. Your real loss at the stop is a bit bigger than the gap between entry and stop.
Turning risk into a position size
Size = money you are willing to lose ÷ distance from entry to stop. With ₹2,000 at risk, entry ₹500 and stop ₹490, that is ₹2,000 ÷ ₹10 = 200 shares. Our position size guide has more examples.
A worked example
Priya has ₹3,00,000. She decides she could live through a 15% fall without changing her plan. Her backtest's worst losing streak was 9, so she plans for 12. 15% ÷ 12 = 1.25%, rounded down to 1% = ₹3,000 per trade. Her daily limit is 2% = ₹6,000: after two full losses she stops for the day. With a stop 20 points away on a NIFTY option (₹1,300 per lot), she can trade 2 lots (₹2,600 at risk, plus charges).
When to change your number
- Lower it when you are new, after a big fall, when trading a new market, or when the market is moving much more than usual.
- Do not raise it to win back a loss, after one great day, or because a tip sounds certain.
- Review it only after 50-100 recorded trades, and only if your real results match what you planned.
General information about the past and about your own numbers. Not financial advice and not a recommendation. It does not consider your goals or situation.
Risk of ruin calculator
Try your own numbers. It replays your win rate and reward thousands of times at random (a simulation, not a forecast) and shows how often an account like yours hit the fall you set.
Frequently asked questions
- Is 1% risk per trade too small?
- It can feel slow, but it lets you survive the long losing streaks that happen to almost every strategy. Many traders start at 0.5-1% and only change it after 100+ recorded trades.
- Does risk per trade mean position size?
- No. Risk is what you lose if the stop is hit. A large position with a close stop can have the same risk as a small position with a wide stop.
- What if my stop gets skipped by a gap?
- Prices can gap past a stop, especially overnight or in small coins and stocks. Your real loss can be larger than planned, which is one reason to keep risk per trade small.
- How much should I risk in a prop firm challenge?
- It depends on the daily and total loss rules and on your own trades. Size so that a normal losing day cannot reach the daily limit.
Turn your risk limit into a size
Type your account, your risk per trade, entry and stop. The planner gives the size, the money at risk and your daily loss limit.