1
Risk percentage
The planned dollar loss divided by current account equity.
Lesson · Trading Risk Management
Risk Per Trade
Measure how fixed-percentage risk changes account decay, losing-streak impact, and the return required to recover.
Core concepts
What to understand
Keep the process direct: define the risk, calculate it, and enforce the limit.
2
Compounding down
Fixed-percentage sizing automatically reduces dollar risk as equity falls.
3
Recovery asymmetry
A percentage loss requires a larger percentage gain to return to the prior peak.
Interactive lab
Change the risk conditions
Adjust the controls and read the market behavior and account impact after each change.
Risk Per Trade Lab
Synthetic educational data · no live market connection
RISK MODEL
Risk process
Apply it in order
Risk calculations should happen before the order is submitted.
Select a survivable percentage
Choose a level that remains acceptable through a realistic losing streak.
Recalculate from current equity
Do not keep risking the original dollar amount after drawdown.
Measure recovery
Use the recovery percentage, not only the drawdown percentage.
Knowledge check
Check your understanding
Select one answer for each question. Feedback appears immediately.
1. With fixed-percentage risk, what happens after a loss?
The same percentage applied to lower equity produces a smaller dollar amount.
2. After a 50% loss, what gain returns the account to its starting value?
The remaining half must double to return to the original balance.
3. What makes a losing streak most damaging?
Large per-trade risk compounds the drawdown much faster.
4. Three consecutive losses at a fixed 2% of current equity. What is the drawdown from the start?
0.98 × 0.98 × 0.98 = 0.9412, so the account is at 94.1% of its start: a 5.9% drawdown, slightly less than 3 × 2% because each loss is taken from a smaller balance. Recovery needed: 1 ÷ 0.9412 − 1 = 6.2%.
Practical rules
- Express risk as a percentage of current equity.
- Stress-test at least 10 consecutive losses.
- Lower risk after drawdown rather than increasing it.
Common mistakes
- Using a fixed dollar amount while equity falls.
- Increasing risk to recover faster.
- Evaluating risk from one trade instead of a sequence.
References
Official reading
The labs use simplified synthetic examples. These sources cover the underlying risk and execution concepts.
CME Group · Controlling Risk
Comparison of fixed-percentage risk and recovery requirements.