Risk per Trade: How Much Should You Risk on One Trade?
Risk per trade is the amount of money you accept to lose if a trade hits its stop. It is usually set as a fixed percentage of the account, such as 0.5% or 1%, and it decides how many contracts you trade — not the other way round.
Beginner · 9 min read · Updated
What you will learn
Choose a risk per trade, measure its effect on a losing streak and convert it into a position size.
Read first: No prerequisite: start here.
Why a percentage of the account
Setting risk as a percentage has two effects. After losses, the amount risked shrinks automatically, which slows the damage. After gains, it grows slowly with the account. This method is called fixed fractional risk.
The size of the percentage matters more than most traders expect, because losses compound. After n losing trades in a row at a risk of r per trade, what is left of the account is (1 − r)n.
What a losing streak does at each level
| Risk per trade | Account left | Loss |
|---|---|---|
| 0.5% | 95.1% | 4.9% |
| 1% | 90.4% | 9.6% |
| 2% | 81.7% | 18.3% |
| 5% | 59.9% | 40.1% |
| 10% | 34.9% | 65.1% |
Ten losses in a row are not rare: with a method that wins 40% of the time, the probability of a run of ten losses somewhere in a few hundred trades is far from negligible. The level you choose must survive that run without forcing you to stop.
From a percentage to a number of contracts
- Risk in money = account × risk per trade.
- Risk of one contract = stop distance in ticks × tick value.
- Number of contracts = risk in money ÷ risk of one contract, rounded down.
Hypothetical example · A $25,000 account on MES
Risk of 0.5%: $125. The stop is 12 points away. On the Micro E-mini S&P 500, one point is worth $5, so one contract risks $60. $125 ÷ $60 = 2.08, rounded down to 2 contracts, for an actual risk of $120. A third contract would bring the risk to $180, above the limit.
The position size calculator does these three steps with the official tick values of each contract.
Choosing your level
- Learning phase: the smallest size your market allows, often one micro contract, because the goal is data, not income.
- Tested method: many traders work between 0.25% and 1% per trade; above 2%, a normal losing streak removes a large part of the account.
- Correlated positions: two trades on the S&P 500 and the Nasdaq-100 at the same time behave almost like one bigger trade; count their risks together.
None of these numbers is a rule from an authority. They are common practice, and the table above shows why.
A sizing routine before each session
- Note the account value at the start of the day.
- Calculate the risk per trade in money and write it down.
- Set a maximum total open risk, for example twice the risk per trade, so that two simultaneous positions cannot cost more than two full losses.
- For each trade, size from the stop with the three-step method, rounding down.
- After the session, check in your journal that every trade respected the amount.
Hypothetical example · Two positions at once
With $125 per trade and a total open risk capped at $250, a second position can only be opened while the first one still carries its full risk if it risks $125 or less. If a third setup appears, it waits until one stop has been moved to break-even or one position is closed.
Common mistakes
- Choosing the number of contracts first and placing the stop where the money runs out.
- Rounding up the number of contracts.
- Raising the risk after a losing day to “win it back”.
- Forgetting commissions and slippage, which add to the real loss when the stop is hit (see slippage).
Practice exercise
Write down your account size and the risk per trade you use today. Calculate what would be left after 10 and after 20 losses in a row. Then take your last five trades and recalculate the number of contracts with the three-step method: how many were sized correctly?
Check your understanding
1. With 2% risk per trade, how much of the account is left after 10 losses in a row?
- 80%
- About 81.7%
- About 98%
Show the answer
Answer: About 81.7%. (1 − 0.02)¹⁰ ≈ 0.817, because each loss is 2% of a smaller account.
2. Risk $150, stop of 10 points on MES ($5 per point). How many contracts?
- 2
- 3
- 4
Show the answer
Answer: 3. One contract risks 10 × $5 = $50; $150 ÷ $50 = 3.
3. What should decide the number of contracts?
- The amount of margin available
- The risk in money divided by the risk of one contract
- The size of the last winning trade
Show the answer
Answer: The risk in money divided by the risk of one contract. Size follows from the stop distance and the risk you accept, never the reverse.
Practise with the free tools
Frequently asked questions
Is 1% risk per trade a rule?
No. It is a common convention. What matters is that the level you choose survives a normal losing streak of your own method, which you can measure in a backtest.
Should risk be a percentage or a fixed amount?
Both work. A percentage adjusts automatically; a fixed amount is simpler and is usually reviewed at set intervals, for example monthly.
What if the stop is too wide for even one contract?
Then the trade is too big for the account: skip it, use a micro contract, or look for a setup with a closer invalidation.
Related lessons
References and further reading
- Micro E-mini S&P 500 futures contract specifications — CME Group
- Day Trading: Your Dollars at Risk — U.S. Securities and Exchange Commission
- Basics of Futures Trading — U.S. Commodity Futures Trading Commission
Written with the help of AI tools, then checked against the sources listed and our methodology. Report an error and we will correct it. Methodology · Editorial policy · Report an error
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