Risk · 6 min read
The 1.5% rule: sizing positions so no trade can hurt you
Capping risk at 1.5% of equity per trade keeps a losing streak survivable. The maths, and a worked example.
Every strategy has losing streaks. A 44% win rate means losing more often than winning — streaks of six, eight or even ten losses in a row are statistically normal over a few hundred trades. Position sizing is what decides whether that streak is an inconvenience or the end of the account.
The formula
Position size = (Equity × 1.5%) ÷ (Entry − Stop)A worked example
With a $10,000 account, 1.5% risk is $150. If USOIL is bought at $78.40 with a stop at $77.20, the stop distance is $1.20 per barrel. $150 ÷ $1.20 = 125 barrels. If the stop is hit, the loss is $150 plus costs — nothing more.
Why 1.5% and not 5%
- Ten consecutive losses at 1.5% leaves roughly 86% of equity intact.
- Ten consecutive losses at 5% leaves roughly 60% — and you need a 67% gain to recover.
- Smaller risk per trade keeps decision-making calm, which keeps execution consistent.
1.5% is a ceiling, not a target. Many traders run below it while learning a new instrument or strategy. The point is that the maximum is known before the market opens.