CandlyxPosition Sizing in Crypto: The 1% Rule Explained
Most losing traders do not lose because their analysis is bad. They lose because they risk too much on one trade, move their stop, or use too much leverage. Position sizing is the simple calculation that keeps any single mistake small.
The 1% rule
The 1% rule says: never lose more than 1% of your trading account on a single trade. With a $5,000 account, your maximum loss per trade is $50. Some traders use 0.5% or 2%; beginners should stay at 1% or below.
The point is survival. With 1% risk, ten losing trades in a row (which happens to every trader) cost about 10% of the account. With 10% risk, the same streak wipes out most of it.
| Risk per trade | Account after 10 losses in a row |
|---|---|
| 1% | about 90% |
| 2% | about 82% |
| 5% | about 60% |
| 10% | about 35% |
The position size formula
Your risk is not the amount you buy. It is the amount you lose if your stop-loss is hit. The formula links the two:
Position size = (Account × Risk %) ÷ (Entry price − Stop price)
Example
- Account: $5,000. Risk: 1%, so $50.
- You want to buy ETH at $3,000 with a stop-loss at $2,900. Distance to stop: $100.
- Position size = $50 ÷ $100 = 0.5 ETH (a $1,500 position).
If the stop is hit, you lose 0.5 × $100 = $50, exactly 1%. Notice that the position is worth $1,500, far more than $50. That is normal: the stop-loss, not the position value, defines the risk.
Wider stop, smaller position
If the chart requires a wider stop, say $2,800 instead of $2,900, the distance doubles to $200 and the position size halves to 0.25 ETH. Your risk stays $50. This is the key habit: place the stop where the chart says, then size the position to fit your risk, never the other way around.
Leverage does not change your risk
Leverage changes how much margin you post, not how much you lose at your stop. With the numbers above, a 0.5 ETH position loses $50 at $2,900 whether you use 1× or 10× leverage. What leverage does change is your liquidation price: with high leverage, the exchange may close your position before price even reaches your stop. Beginners are better off with no leverage at all.
Measure results in R
Professional traders track results in R, the amount risked per trade. Losing at your stop is −1R. A target twice as far as your stop is +2R. Thinking in R keeps you focused on process instead of dollar amounts, and makes your trading journal comparable across account sizes.
A simple checklist before every trade
- Where is my stop-loss, based on the chart?
- What is 1% of my account?
- What position size does the formula give?
- Is my target at least 2R away?
- If the stop is hit, am I completely fine with the loss?
Level 3 of Candlyx covers this in depth: stops, targets and expectancy, leverage, margin and liquidation, trade management, psychology, and a complete trading plan template you backtest before moving from paper to real money.
Educational content only. Not financial advice. Trading crypto-assets carries a high risk of loss.