The 1% rule: sizing positions correctly
The 1% rule means: if the trade hits its stop loss, you lose at most 1% of your capital. Not 1% of margin, not 1% in lots — the actual money lost when you're wrong.
The formula
Lots = (Capital × % risk) ÷ (Stop distance × Value of 1 price unit per lot)
- XAUUSD: 1 lot = 100 oz ⇒ $1 of price = $100 per lot.
- EURUSD: 1 lot = 100,000 EUR ⇒ 1 pip (0.0001) = $10 per lot.
- USOIL, stock CFDs: contract sizes differ between brokers — always check “Contract size” in the symbol specification in MT5.
Examples with $1,000
- Gold, $3 stop: $10 ÷ (3 × $100) = 0.03 lots.
- EURUSD, 15-pip stop: $10 ÷ (15 × $10) = 0.06 lots.
Compare with our demo report: the early phase used a sensible 0.01–0.1 lots, but later there were 90-lot trades — thousands of times the 1% level. See the breakdown in the case study.
Quick calculator
Position size: 0.03 lots · risk $10
Three companion rules
- 3% max daily loss: hit it and stop — no “winning it back”.
- Total open risk ≤ 3%: at most 3 trades at 1% at the same time.
- 10% drawdown: cut risk to 0.5% until you recover half of it.
At 1%, it takes roughly 10 losses in a row to lose ~10% of capital. Our demo report's longest losing streak was 9 trades — enough to show why this rule matters.
Educational content, not investment advice.