Using the 1% risk rule, I mean that you apply risk management to avoid losing more than 1% of your trading account value on a single trade.
So if you lose a trade with your $10,000 trading account, your account value will be $9,900.
In trading, it's impossible to win every trade, and the 1% risk rule helps protect your trading account when you lose. If you risk 1 percent of your trading account on each trade, it doesn't hurt you to lose five trades in a row.
If more beginner traders followed the 1% rule, many more would be successful in their first year trading.
Risking 1% per trade may seem like a small amount to some people, but trading with a high risk reward ratio can still provide great returns.
If you risk 1%, you should preferably set your take profit to 2% or more.
Risk reward ratio 2/1 = 2.
When swing or day trading, gaining a few percentage points on your account each day or week is possible when using this simple rule, even if you only win half of your trades.