Jan 28, 2026 · Josh · 1 min read
The 1% Rule: Position Sizing to Survive Drawdowns
Direct answer
Is the 1% risk rule effective? Yes, as a survival rule. Research on optimal betting and risk of ruin shows that smaller fractional risk reduces drawdowns and improves longevity. However, 1% is a guideline, not a guarantee, and must be adjusted for volatility and strategy edge.
A survival-first sizing framework that keeps you in the game.
Most traders do not fail because they lack entries. They fail because they size too big.
Why 1% is a survival rule
Small fractional risk keeps losses survivable. This is consistent with optimal betting research, which shows that reducing risk preserves long-term growth by preventing deep drawdowns.
The quick sizing formula
Account size x 0.01 = maximum risk per trade. Divide that number by your stop distance to get position size.
When to go lower
If volatility expands or your edge is inconsistent, cut risk to 0.5 percent. Survival always beats speed.
Related reads
References
FAQ
Is 1% too conservative?
For some strategies, yes. The point is to match risk to volatility and edge.
Should I size by dollars or points?
Size by risk per trade in dollars, then translate to points or contracts.
What if my win rate is high?
Higher win rate helps, but drawdowns still happen. Keep risk capped.
About the author
Josh
Finance broker, disciplined trader, and lifter. I document practical systems for risk, training, and discipline so readers can build results that compound.
If this helped you, reach out. I read every message and update the playbook when new data shows up.
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