The One Percent Trading Rule To Protect Your Forex Trading Account 

 August 1, 2021

By  Advanced Strategies

One Percent Trading Rule
One Percent Trading Rule

The one percent risk rule will protect your account for you. In fact, when you implement the One Percent Trading Rule each and every time, this might actually be the best protection on your account… much better than any stop loss strategy.

The benefits of this strategy are as follows: it protects against losses greater than 1% in any given year; provides some protection from bear markets that can last up to three years at a time (one-half or more); and allows an investor to earn money on all trades while only risking less than 2%.

The One Percent Trading Rule

It’s surprising how much of an effect your trade size has on your day trading performance. If you’re too conservative with the amount, it’ll lead to a small profit at best or a large loss if things go south; while being too liberal will force you in and out of trades repeatedly just for slight gains that ultimately add up to nothing when considering commission fees and opportunity cost.
Professional day traders will often use the one percent risk rule as a guideline for their trades. If they have $1,000 in trading account and would like to maintain it at that level without risking more than 0.01% of this amount on any single trade then making 100 consecutive winning trades is required.

Will the One Percent Trading Rule Slow My Account Growth?

The One Percent Trading Rule is a measure that can be used to calculate the probability of whether an investment will result in losing more than one percent. I know you’re probably thinking, “won’t this limit me?” It actually doesn’t; it lets you figure out how much risk there is for your desired return and make decisions accordingly. This way, instead of taking all risks on at once- which could cause devastating losses or gains -you’ll take smaller steps so as not to mess up too hard if something goes wrong.
The most basic example: Say I want $1000 per year from my investments (annually). So I need them to grow by 10% each year before interest rates are taken into account. The one percent risk rule means that you are not allowed to invest more than $300 of your account size in any single trade.
A risky stock purchase may seem daunting when it involves using all of the money from a trading account, but there is an easy solution: leverage! This comes with its own set of risks and should be used only by those who know what they’re doing – like yourself if you’re new.

Applying the One Percent Trading Rule

If you have ever felt that your trades are slow to grow and make the profits they should, it may be because of a lack of diversification in account risk. The one percent rule is most effective when implemented correctly with an understanding for both trade risks and individual accounts.
Risk is broken down into two parts; account risk and trade risk. The one percent rule works when implemented correctly. Trading with a sound strategy, the ideal position size of an individual stock will be 1%. This way it’s less likely you’ll get shaken out or have to liquidate at a loss because of adverse market conditions.
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