How Much Should You Risk Per Trade?

Risk per trade is your budget for being wrong. Set it before you open a chart, and leave it alone no matter how good the setup looks.

And when a setup isn't there, Chad's advice is simple. "Don't force a bad trade with full risk... It's okay to wait."

How do you set risk per trade?

Account balance times your chosen percentage. A $10,000 account at 1% risks $100 per trade. At 2%, $200. That's the number position sizing works backward from.

Traders also write it as 1R. A trade whose target is three times the stop distance is a 3R trade, which is how the 1:3 filter is usually expressed.

Why does 1% versus 10% risk per trade matter so much?

Because losing streaks compound. Ten stopped trades in a row, at different settings:

• At 1% per trade, the account is down about 9.6%.
• At 2%, about 18.3%.
• At 4%, about 33.5%.
• At 10%, about 65%.

Ten in a row isn't rare over a year of trading. At 1 to 2% it's a bad month you can study. At 10% it's the end of the account. One's a lesson. The other's a funeral.

What does 2% risk per trade look like on a $25,000 account?

Illustrative numbers. The trader set 2% before opening the chart, so the budget is $500.

• Bitcoin sweeps equal lows at 60,000, wicks to 59,500 and reclaims the level.
• Entry is 60,200. The stop goes at 59,500, the low of the sweep, where the idea is proven wrong. Distance: 700.
• Size: $500 divided by 700 is about 0.714 BTC, roughly $43,000 of exposure. That exposure is not the risk. The risk is $500.
• The target at 62,400 is 2,200 away, so the trade is 3.1R.

At the 4% ceiling, the budget would be $1,000 and the size would double to about 1.43 BTC. What didn't change? The entry, the stop and the target. Only the size moves with the risk setting. The chart NEVER moves to fit the budget.

What's our house rule for risk per trade?

1 to 2% per trade while you're new, never more than 4%. Set before the chart is opened, and the same from trade to trade, whatever your conviction.

In the Decision Protocol, risk per trade is the fixed input to decision three, position sizing. Decision four checks it again across every correlated position through total exposure. Behind it sits unemotional risk capital: the account itself should be money you can learn with calmly.

Chad Wittfeldt is blunt about why it stays fixed: "if you continue to over risk or you continue to variate your risk based on how you're feeling that day, you will never be successful at this."

How does 1% risk per trade turn into 10%?

Mood. Risk goes up on the trade that "feels certain," then up again after a run of stops to win it back fast. Nobody decides to risk 10%. They get there one feeling at a time. Feel the urge to size up after a losing streak? That's revenge trading. Step away from the screen.

The other mistake is confusing margin with risk. Putting $1,000 of margin into a position doesn't mean you're risking $1,000. With a stop, you're risking whatever the stop distance and size add up to. Without one, you may be risking all of it. And the guru telling you to "just use a mental stop" isn't going to refund the difference.

What risk per trade number should you write down today?

One number: your risk per trade, on a sticky note where you'll see it. Then check your last five trades against it.

For the full framework, see crypto risk management. To turn a percentage into a position, read crypto position sizing or use the position size calculator.

Source: the CFTC's customer advisory on virtual currency trading gives the same advice in plain terms: only trade money you can afford to lose.