The idea in one breath: Decide what a single trade may cost you before you look at the setup. One percent of the account is the common answer, and the number matters far less than the fact that you chose it in advance.
Why in advance
A risk figure chosen after seeing a setup is not a risk figure, it is an expression of enthusiasm. The whole protective function comes from the number being fixed while you are indifferent, then applied while you are not.
The arithmetic
Account times risk percentage gives the dollar budget. Divide that by the per-unit risk — the distance from entry to stop, multiplied by the contract size — and you have your position size. Size is the output; it is never the input.
What the number buys you
At 1%, ten consecutive losses cost about 10% of the account. That is a bad month and a survivable one. At 4%, the same streak costs roughly a third, and the recovery maths turns hostile — which is the subject of the drawdown lesson.
Work out the position size. The calculator is embedded elsewhere on the site — do this one yourself.
Drawdown Maths
Losses and the gains needed to undo them are not symmetric, and the asymmetry gets brutal quickly. This is the arithmetic that should decide your risk percentage — not your confidence.
Continue the track