How to calculate risk per trade
Risk per trade is how much of your capital you accept losing on one trade, usually 0.5% to 1% on a prop firm account. Once the cash amount is set, position size follows from the stop distance. Fixing the risk before choosing the lot is what keeps a bad day from becoming a rule breach.
Setting risk per trade is a four-step decision: pick the percentage, convert it into cash, turn it into volume and check it against the account limit. This guide walks all four with real numbers.
To go deeper into each part of this calculation: Lot size and position size calculator · Risk per trade · Risk-reward ratio
Step 1 — pick the percentage
Start from the losing streak you can sit through without changing plan. At 1% per trade, ten losses in a row cost 9.6% of capital. At 3%, 26%. At 5%, 40% — and recovering 40% requires a 67% gain.
If you take up to three positions per session and the firm caps the daily loss at 5%, risking more than 1.5% per trade already puts the whole day at stake in three stops. The percentage is not a preference: it is what remains after the limit.
Step 2 — convert into cash
Cash risk = capital × percentage. On 25,000 at 1%, that is 250. Use the specific account's capital, not the combined equity of all of them — each account has its own limit and its own death.
Subtract costs: round-trip commission and swap come out of the same budget. On a short trade with a tight stop, 20 to 30 of a 250 budget can vanish into cost alone.
Step 3 — turn it into volume
Volume = cash risk ÷ (stop distance in points × point value per lot). With a 40-point stop and point value of 10: 250 ÷ 400 = 0.625 lots. Round down, respecting the instrument step.
Stop distance has to come from the chart — a technical level or a volatility multiple — never from the lot you would like to trade. Reversing that order is choosing the answer before the arithmetic.
Step 4 — check against the limit
Multiply risk per trade by the number of trades you take on a bad day. If the result exceeds the daily limit headroom, reduce the percentage or the number of trades. There is no third option.
Redo the maths whenever capital changes — after a payout, a scaling step or a strong streak. Yesterday's correct lot is today's wrong lot whenever capital moved.
Doing it in practice
The public position size calculator runs steps 2 and 3 with no login. Steps 1 and 4 need the history of your own trades — real losing streaks, average trades per day, average cost — and that is what TCC accumulates as you log results.