A common rule is to risk no more than 1–2% of your virtual capital per trade. This approach helps preserve your account over time, even if you experience a series of losses. For example, if you have $10,000 in virtual capital, risking 1% means you would only lose $100 if the trade goes against you. This small percentage ensures that emotional decisions don’t dominate your strategy and that you stay disciplined.

Risking too much, say 5% or more, can quickly deplete your capital, especially during drawdowns. Even in a demo account, treating capital as if it were real money is essential. It builds psychological resilience and reinforces good habits that carry over to live trading.

By limiting risk per trade, you also allow room to take multiple positions and diversify your strategy. Consistent, calculated risk management is a core principle of successful trading. It protects you from overexposure and keeps you in the game long enough to let your edge play out.

Ultimately, risking a small portion per trade isn’t about avoiding loss, it’s about ensuring survival, maintaining consistency, and developing the mindset of a disciplined trader. That's how long-term success in the markets is achieved.