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Risk warning CFDs, forex and crypto are high risk and most retail CFD accounts lose money. Nothing here is investment advice and no result is guaranteed. We may earn commissions from partners.High-risk products. Not investment advice. Nothing is guaranteed.

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Risk management: the 1–2% rule, R:R and position size

The most important part of surviving: risk per trade, sizing from the stop, break-even win rates and drawdown maths.

Fixed risk per trade

Decide in advance what percentage of the account you accept losing if the stop is hit, usually 0.5–2%. With a 1,000 USD account and 1% risk, every losing trade costs only 10 USD, whether the stop is wide or tight.

Position sizeMoney at risk / (stop distance × pip value per lot)
Gold exampleRisk 10 USD, stop 5 USD, 1 lot of gold = 100 oz → 10 / (5 × 100) = 0.02 lots
ToolsHow many lots? and What is one pip worth? in the Toolbox

Reward-to-risk (R:R)

R is the money at risk on one trade. A 2R target means making twice the risk. The minimum win rate to break even = 1 / (1 + R:R).

R:R 1:1Need to win more than 50%
R:R 1:2Need to win more than 33.3%
R:R 1:3Need to win more than 25%

Drawdown maths

Lose 10%Need +11.1% to recover
Lose 25%Need +33.3%
Lose 50%Need +100%

Rules worth having

  • Always place the stop loss when you open the trade.
  • A daily loss limit (for example 3R): hit it and stop for the day.
  • Don't hold losers hoping, and don't add to losers to win it back.
  • High leverage doesn't add edge, it only speeds up blowing the account.
Watch outEven a good strategy has losing streaks of 5–10 trades. At 1% risk, ten losses cost about 10%; at 10% risk they wipe out almost everything.

Try it on a chart

Educational content only, not investment advice. Practise on a demo account before using real money.