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The 10% Risk Rule
We recommend that you generally never trade with more than 10% of
your NET WORTH. Even though you are using risk control, you can
never remove the “Market Risk” involved in trading. Market events
such as “Price Gaps” can happen in which “Stop-Losses” may not be
able to limit your risk.
The 2% Risk Rule
Never risk more than 2% (of your overall trading account size) on any
one trade.
You must be able to incur a number of losses in a row so as not to suffer
serious drawdown in your trading account. That is the goal of money
management and it separates the pros from the novices. Proper money
management enables you to stay in the game and avoid losing or
depleting your capital.
The 6% Risk Rule
You can allow a total of 6% risk (of your overall trading account size)
provided that the risk is diversified so as to never risk more than 2% on
any sector of the market.
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