1% vs 2% Risk Per Trade: Position Sizing Basics
Learn how 1% vs 2% risk per trade changes position size, drawdowns, and consistency, with simple examples and a practical sizing checklist.
Risk per trade sets how much of your account you are willing to lose if a stop is hit. Choosing 1% vs 2% directly controls position size, your drawdown during losing streaks, and how consistently you can execute a strategy.
What 1% and 2% Risk Per Trade Mean
Risk per trade is the dollar amount you accept to lose when a trade reaches your stop-loss (a predefined exit that caps loss). With a $10,000 account:
- 1% risk = $100 maximum loss if the stop is hit.
- 2% risk = $200 maximum loss if the stop is hit.
Position size is then set so that the distance between your entry and stop equals that dollar risk. Example: You plan to buy a stock at $20 with a stop at $19.50. Your risk per share is $0.50. If you risk 1% ($100), you can take 200 shares (because a $0.50 move to the stop would lose $100). If you risk 2% ($200), you can take 400 shares.
The key idea: the wider your stop, the fewer shares you can hold for the same risk; the higher your risk percent, the more shares you can hold. Both choices change win/loss size and emotional pressure.
Comparing 1% vs 2% in Practice
| Aspect | 1% risk | 2% risk |
|---|---|---|
| Position size (same stop) | Smaller | About double |
| Loss per losing trade (on $10k) | $100 | $200 |
| 10-loss streak impact | ~10% drawdown | ~20% drawdown |
| Emotional load | Lower | Higher |
| Time to recover | Generally shorter | Generally longer |
- 1% favors consistency and smoother equity curves. It helps newer traders and those refining entries and stops.
- 2% can grow accounts faster when a strategy is proven and executed with discipline, but swings feel larger.
Position Sizing Steps (Quick Checklist)
- Define your stop-loss first. Place it where the idea is invalidated, not where it “fits” your account.
- Choose a fixed risk percent (start small and keep it consistent across trades).
- Convert the percent to dollars (e.g., 1% of $10,000 = $100).
- Measure risk per share/contract (entry minus stop, including any buffer for slippage).
- Size the position so a stop-out loses about your dollar risk; round down to the nearest lot size.
- Account for costs and volatility. If stops need to be wider, consider lowering the percent risk.
You can rehearse these steps in a simulator before going live. See How to Practice Trading Without Risk for a structured approach.
When to Prefer 1% or 2%
- New strategy or new trader: 1% helps keep drawdowns manageable and leaves room to learn from mistakes.
- Proven edge with strong execution: 2% may be acceptable, especially if your stop distances are small and consistent.
- High volatility or wider stops: Consider leaning toward 1% to keep dollar losses level.
- Scaling plan: Many traders start at 0.5%–1%, then increase toward 2% only after a tracked sample shows stable performance.
- Risk controls: Add a daily/weekly loss cap to avoid compounding a bad day, regardless of the per-trade percent.
The choice is less about finding a perfect number and more about matching risk to your strategy’s typical stop size, win rate, and your ability to execute under pressure.
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