Glossary
What Is Risk Per Trade and How to Choose It
The share of your account you lose if the stop is hit. It is chosen before the trade and sets the position size — not the other way round.
How it works
Risk per trade is a pre-chosen share of account size a trader is willing to lose if a trade hits its stop. It's set as a percentage of current balance rather than a fixed dollar figure, so it automatically adjusts as the account grows or shrinks without manual recalculation before every trade.
Risk per trade is what determines position size, not the other way around: you choose the risk percentage first, then calculate position size from the distance between entry and stop. Pick position size arbitrarily first and only check the resulting risk afterward, and it's easy to risk far more than planned by accident.
The standard range most disciplined traders stick to is 0.5–2% of balance per trade. At that level, a streak of 5–10 losing trades in a row — which happens even to working systems — doesn't knock the account out of the game and leaves room to recover.
Example
Account balance is $5,000, risk per trade is set at 1%, or $50. The distance from entry to stop is 2% of the asset's price. Position size is calculated so a 2% move against the trade produces exactly a $50 loss — no more, no less.
Common mistake
A common mistake is raising the risk percentage after a losing streak, trying to win back losses faster. That doesn't lower the risk of blowing the account — it raises it, right when the system is already in a drawdown.
Read next
Related terms
Frequently asked questions
- Can risk per trade vary by setup?
- Yes, if that decision is made in advance and written into the rules, not changed on the fly under the influence of recent trades.
- What happens if you risk 5% or more per trade?
- A run of a few losses in a row quickly produces a deep drawdown that's mathematically harder to recover from — see drawdown.
What's left of the daily limit — as the day goes
Give an account a daily limit and the Trading OS journal shows how much more you can lose today, from your closed trades.
No sign-up — the journal runs in your browser; an account is only needed for sync.