Forex Risk Management: Position Sizing, Stop-Losses, and the 1% Rule
Forex risk management is the set of methods traders use to limit how much of their account is exposed on each trade and across all open positions. The main tools are position sizing, which sets trade size based on the amount at risk; stop-loss orders, which define an exit point if price moves against a position; and percentage limits such as the widely cited 1% rule, under which no more than 1% of account equity is placed at risk on a single trade. These methods do not prevent losses, and stops can fill at worse prices in fast markets, but they make the size of each potential loss more predictable.