The 1% rule is a fundamental risk management principle in Forex trading. It limits the amount of capital a trader risks on any single trade to no more than 1% of their total trading account balance. For example, a trader with a 10,000 account should not risk more than 100 per trade.

This rule helps traders preserve capital and avoid significant losses, ensuring they can survive losing streaks and continue trading. Since Forex markets are highly volatile, even the best strategies can experience multiple consecutive losses. By adhering to the 1% rule, traders prevent a few bad trades from wiping out their accounts.

Why Traders Follow the 1% Rule
Capital Protection – Prevents large drawdowns, allowing traders to recover from losses.

Emotional Control – Reduces stress and impulsive decisions by keeping risk manageable.

Long-Term Sustainability – Helps traders stay in the game long enough to benefit from profitable opportunities.

Flexibility – Allows for adjustments in position sizing based on account growth or market conditions.

While some aggressive traders may risk 2-5% per trade, the 1% rule is widely recommended for beginners and conservative traders to minimise risk and ensure steady growth.