How much to risk per trade: the losing-streak math

What this video covers

Why many traders risk 0.5% to 2% per trade, shown through what ten straight losses do at 1%, 5% and 10% risk. Plus the recovery math and the risk formula.

Sources and the longer explanation: How Much Should I Risk per Trade?.

Numbers shown on screen

• Risk 1% per trade: −9.6%
• Risk 5% per trade: −40%
• Risk 10% per trade: −65%
• Loss: −50%
• Gain to recover: +100%

How the visuals were made

In 0:43 the video moves through 6 scenes, including a bar chart, “Account after 10 straight losses”; a column chart, “The recovery problem”; a worked formula card (Risk = entry-to-stop distance × size); a worked formula card ($5,000 × 1% = $50 at risk). All graphics were rendered frame by frame by UXS; no stock footage, logos or faces are used.

Chapters

• 0:00 Rule of thumb: 0.5% to 2% per trade
• 0:07 Account after 10 straight losses
• 0:17 The recovery problem
• 0:21 Risk per trade
• 0:25 From percentage to position size
• 0:36 Risk note

Transcript

Many experienced traders risk about 0.5% to 2% of their account on a single trade.

Why? Ten losses in a row at 1% cost about 9.6%. At 5%, about 40%. At 10%, about 65%.

And a 50% loss needs a 100% gain just to get back.

Your risk is the distance from entry to stop, times position size.

Example: with $5,000 and 1% risk, you can lose $50. A stop 25 cents away means 200 shares. A stop one dollar away, 50 shares.

It's a rule of thumb, not a regulation. Educational only, not financial advice.