The 1% Rule: Position Sizing for Long-Term Survival

Most traders blow up their accounts not because they pick bad stocks, but because they size positions recklessly. Capital preservation is the first job of every serious trader.

1. The 1% Rule Explained

Never risk more than 1% of your total trading capital on a single trade. On a ₹5,00,000 account, that means a maximum loss of ₹5,000 per position—no matter how confident you feel. This single rule ensures no single mistake can cripple you.

2. Position Size = Risk ÷ Stop Distance

To find your quantity, divide your rupee risk by the distance between entry and stop-loss. If you risk ₹5,000 and your stop is ₹10 away from entry, you can buy 500 shares. Our Position Size Calculator does this math instantly.

3. Surviving the Drawdown

A 50% loss requires a 100% gain just to break even. By capping risk per trade, you keep drawdowns shallow and recoverable—turning trading from gambling into a repeatable, probabilistic edge.