Every strategy has losing streaks. Even a method that wins more than half the time will, sooner or later, lose 6, 8 or 10 trades in a row. The 1% rule exists so that a normal losing streak is annoying, not fatal.
What a losing streak does to your account
- Risking 1% per trade: 10 losses in a row ≈ −9.6%.
- Risking 5% per trade: 10 losses in a row ≈ −40%.
- Risking 10% per trade: 10 losses in a row ≈ −65%.
The deeper the hole, the harder it is to climb out. After a 50% loss you need +100% just to get back to where you started. After a 10% loss you need about +11%.
How to apply it
- 1Pick a fixed risk per trade: 0.5% while learning, up to 1% once you're consistent.
- 2Calculate your lot size from that risk and your stop distance — every time.
- 3Set a daily loss limit (for example 2–3%) and stop trading when you hit it.
- 4Review your journal weekly before you ever increase risk.
Small risk doesn't make trading safe. Leveraged trading can still lose money fast — it just gives your skills time to develop.