One-percent rule
The one-percent rule is a risk guideline: never risk more than 1% of your account on a single trade.
Risk here means what is lost if the stop-loss is hit — stop distance × position size — not the margin posted or the notional value of the position. The rule is therefore a sizing constraint: fix the risk at 1%, and position sizing derives how much to trade from wherever the stop belongs.
The point of the number is streak survival. Losing runs are a normal property of every strategy, not a malfunction. At 1% risk, ten consecutive losses leave the account down about 9.6% — unpleasant, recoverable. At 5% risk per trade, the same ordinary streak is roughly a 40% hole, which demands a 67% gain just to get back. The rule does not make you right more often; it makes being wrong survivable.
Example
Account $100,000, so maximum risk per trade is $1,000. A EURUSD setup needs a 25-pip stop: $1,000 ÷ 25 pips = $40 per pip, which at $10 per pip per standard lot means 4 lots. A different setup with a 10-pip stop allows 10 lots for the identical $1,000 risk. The dollar risk stays fixed; the size is whatever the stop allows.
In a prop-firm challenge
Challenge rules turn the arithmetic sharp. With a 5% daily loss limit, five full 1% losers end the day; with a 10% max drawdown, ten end the account — well inside a normal streak for many strategies. That is why most evaluation guidance treats 1% as a ceiling, not a default, and sizes at 0.5% or 0.25% to double or quadruple the headroom. The trade-offs are worked through in risk management for funded traders.