Risk per trade: the 1-2% rule
What you learn in 3 minutesA person with ₹83,250 in an account once risked ₹16,650 on a single USD/INR trade. The price moved against them by 20 pips, and the loss was ₹16,650 — one fifth of the account gone in an afternoon. This lesson shows how to choose that number before anything else: the money you are willing to lose on one trade. Once that number is fixed, position size, stop distance and target all follow from it.
Two paths from ₹83,250 over 20 trades
| Step | Amount | Note |
|---|---|---|
| Account balance | ₹83,250 | Starting capital, roughly $1,000 at 83.2500 |
| Risk per trade at 1% | ₹830 | 1% of ₹83,250 |
| Risk per trade at 20% | ₹16,650 | 20% of ₹83,250 |
| Pips lost per trade | 20 pips | The stop distance used in both paths |
| Position size at 1% risk | 0.04 standard lots | ₹830 divided by (20 pips × ₹10 per pip per standard lot) = 4.15, rounded down to 0.04 |
| Position size at 20% risk | 0.83 standard lots | ₹16,650 divided by (20 pips × ₹10) = 83.25, rounded down to 0.83 |
| Loss after 10 losing trades at 1% | ₹8,300 | 10 × ₹830 |
| Loss after 10 losing trades at 20% | ₹166,500 | 10 × ₹16,650, which is more than the account holds |
| Balance after 20 trades at 1% (10 losses, 10 wins of 20 pips) | ₹83,250 | 10 losses of ₹830 and 10 wins of ₹830 cancel out before costs |
| Balance after 20 trades at 20% (10 losses, 10 wins of 20 pips) | ₹0 | The account cannot survive 10 losses of ₹16,650; it is wiped out |
A broker may round position sizes to the nearest 0.01 lot, add spread, commission or swap, and quote a slightly different USD/INR rate. These charges vary between brokers, so the final rupee figure will differ.
The mistake people make here
The common mistake is to pick the position size first, often because a large lot feels like the way to make a small account grow. The stop is then placed wherever the chart seems to allow, and the risk becomes whatever it becomes. That is backwards. Decide the rupee amount you can lose first, then divide it by the stop distance in pips and the pip value, and let that give the position size. If the size is too small to be allowed, the trade is too expensive for the account, not the other way round.Check yourself
An account holds ₹83,250. You risk 1% on a USD/INR trade with a 25-pip stop. One standard lot pays ₹10 per pip. What position size does that give?
1% of ₹83,250 is ₹832.50. 25 pips × ₹10 = ₹250 per standard lot. ₹832.50 ÷ ₹250 = 3.33, so 0.03 standard lots.
You risk ₹830 on a trade and the stop is hit. The account started at ₹83,250. What is the balance now, before costs?
₹83,250 − ₹830 = ₹82,420.
If you risk ₹16,650 per trade and lose 5 trades in a row, how much is gone?
5 × ₹16,650 = ₹83,250, which is the whole account.