Position Sizing: The 1% Rule
How many lots? It is arithmetic, not instinct.
Written and reviewed by the Fundezy team · how we produce this
Nothing in trading matters more than the answer to one question: how many lots? Get it consistently right and mediocre entries make money; get it wrong and brilliant entries blow up.
Fixed-fractional risk
The professional default: risk a fixed percentage of the account per trade — classically 1% (2% at the aggressive end). With your simulated starting balance of 100,000, one percent is 1,000 per trade.
"Sizing" means choosing lots so that a stop-out loses exactly that amount — no more.
The formula on this platform
Profit and loss here is simple and linear:
P/L = (exit − entry) × lots × 100,000 (for buys; reversed for sells)
So the lot size that risks R dollars with a stop D price-units away is:
lots = R ÷ (D × 100,000)
Worked example
EUR/USD at 1.0900, stop at 1.0850 (50 pips = 0.0050), account 100,000, risk 1% = 1,000:
- Risk per lot = 0.0050 × 100,000 = 500 per 1.00 lot
- lots = 1,000 ÷ 500 = 2.00 lots
Same setup, but a 20-pip stop (0.0020): 0.0020 × 100,000 = 200 per lot → 1,000 ÷ 200 = 5.00 lots. Tighter stop, bigger size, identical risk. That trade-off — stop distance vs. size at constant risk — is the entire discipline in one line.
Why percentage, not lots
Fixed lots mean your risk drifts as the balance moves: 1.00 lots is 1% at 100k but 4% at 25k — exactly when you can least afford it. Fixed-fractional sizing automatically deleverages into drawdowns and compounds into winning streaks.
The payoff you can't skip
Sized at 1%, a losing streak of ten trades costs about 10% of the account — survivable and recoverable. Sized at 10%, the same streak costs ~65%. Both streaks happen to everyone; only one trader is still operating afterward.
In the Trade Terminal, compute your lot size before touching the volume field. Writing the three inputs — risk %, entry, stop — into the journal as you place the trade builds the habit that later carries real money.
By the numbers
The European regulator ESMA reported in 2018 that 74–89% of retail CFD accounts lose money — and most of that damage enters through position size, not bad analysis. The arithmetic of survival: at 1% risk, ten straight losses cost about 10% of the account (0.99¹⁰ ≈ 0.90); at 10% risk, the identical streak costs about 65% (0.9¹⁰ ≈ 0.35).
Practice in the simulator
Place a trade sized to a 1% risk — apply what you just read with simulated money.
Check your understanding
4 questions · answer all, then submit.