Understanding RISK Per Trade Basics
Risk management is the core of trading longevity. Whether you're a beginner or a seasoned trader, how much you risk per trade directly impacts your results and your emotional control.
In today’s guide, we break down the types of risks based on position sizing and equity exposure — so you can trade smarter, not harder.
How Is Risk Per Trade Calculated?
Your risk per trade depends on two variables:
🔹 The distance from your entry to stop-loss, measured in pips
🔹 The lot size or volume you're trading
This defines how much of your capital is on the line for each position.
Types of Risk Exposure
Understanding where your trades fall on the risk spectrum helps you adjust your strategy and protect your capital.
🟢 Low Risk: 1–2% of Trading Equity
🔹 Ideal for new traders and those who prefer capital preservation
🔹 Allows low drawdowns and high psychological stability
🔹 Best for building consistency and confidence over time
🟡 Medium Risk: 2–5% of Trading Equity
🔹 Suitable for experienced traders with strong discipline
🔹 Offers higher returns, with moderate risk of capital erosion
🔹 Requires mental resilience during inevitable losing streaks
🔴 High Risk: 5%+ of Trading Equity
🔹 Reserved for rare, high-confidence trade setups
🔹 A single win can be very profitable
🔹 But 2-3 losses in a row can cause significant damage
🔹 Only use when all signals are perfectly aligned
🛑 Extreme Risk: 15%+ of Trading Equity
🔹 Not recommended — often referred to as "suicidal risk"
🔹 Just 4-5 losing trades can wipe your entire account
🔹 No strategy offers 100% accuracy, so this is financially reckless
The Most Common Mistake: Fixed Lot Trading
Many traders fall into the trap of:
🔹 Using fixed lots for every trade
🔹 Ignoring the actual percentage at risk
This leads to inconsistent risk exposure and poor long-term results.
Instead, always calculate your position size based on the distance to stop-loss and your desired risk percentage.
Final Thoughts: Master Your Risk, Master Your Trading
Your risk per trade defines whether you survive the market long enough to thrive.
Use the following principles:
🔹 Risk 1–2% if you're new
🔹 Risk 2–5% if you're experienced
🔹 Risk 5%+ only in exceptional cases
🔹 Never go above 15% — it’s not worth it
Plan smart. Trade with discipline. Protect your capital.