The 1% Rule for Funded Traders: Start With Remaining Drawdown
Risking 1% of a nominal account balance can be too much when only a small loss allowance remains. Funded-account position sizing should begin with the distance to the applicable failure threshold, then account for daily limits, open exposure and execution costs.
Risking 1% of a nominal account balance can be too much when only a small loss allowance remains. Funded-account position sizing should begin with the distance to the applicable failure threshold, then account for daily limits, open exposure and execution costs.
Why the account label can mislead
Consider an illustrative $50,000 account with only $1,100 between current equity and its operative loss floor. A $500 planned loss represents 1% of the headline account, but nearly half of that remaining buffer. Calling the trade small because its percentage is small would obscure the actual constraint.
Calculate size from the stop
First identify where the trade idea is invalidated. Convert that distance into dollars per unit or contract. Then divide the chosen loss budget by that amount and round down to a permitted size. Reserve additional room for commissions and possible slippage; a stop is not a promise of an exact exit.
For a hypothetical instrument worth $4 per point, a ten-point stop creates $40 of price risk per unit. A $130 budget allows three units before costs, not four. If required costs make three units too large, reduce the size again or skip the trade.
Manage combined exposure
Several positions can express the same market view. Review the loss if correlated trades fail together, and define when the session ends after losses or execution mistakes. Recalculate after withdrawals or a change in the trailing threshold.
The goal is a repeatable sizing process that remains inside the account’s constraints. No universal percentage can replace that calculation, and disciplined sizing alone does not make an unprofitable strategy profitable.
Sources and scope
Content review: 31 October 2026. These references support further checking; this article does not certify current prices, residency eligibility or payout performance. Numerical examples are hypothetical unless explicitly linked to a dated primary record. This is educational information, not a forecast or a promise of passing an evaluation. Check the selected account’s current agreement before relying on a rule.
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