Managing risk should be a top priority with any investment. Calculating position size is a good way to exercise this.
In this way, determining the account size is simply looking at theHow to determine account risk
The second step is determining your account risk. This involves deciding what percentage of your available capital you’re willing to risk on a single trade.In the traditional financial world, there’s an investing strategy called the 2% rule. According to this rule, a trader shouldn’t risk more than 2% of their account on a single trade.
. If you’re a more active trader, and especially if you’re starting out, it could be lifesaving to be even more conservative than this. In this case, let’s modify this to be theThis rule dictates that you shouldn’t risk more than 1% of your account in a single trade. Does this mean that you only enter trades with 1% of your available capital? Absolutely not! It only means that if your trade idea is wrong, and yourSo far, we’ve determined our account size and account risk.
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