Fixed-fractional risk

Fixed-fractional risk means you risk the same percentage of your current account on every trade — one percent, or half a percent, whatever you choose — rather than a fixed cash amount or, worse, whatever feels right that morning. It sounds mechanical because it is. That is the entire point.

The arithmetic is protective in both directions. As the account grows, one percent grows with it, so your size scales up automatically without any decision. As the account shrinks, one percent shrinks too, so losing streaks decay geometrically instead of linearly. Ten consecutive losses at a flat 1% take a 10,000 account to about 9,044 — painful, but nowhere near fatal. The same ten losses at a flat 10% leave 3,487.

The rule also quietly removes the most expensive decision in trading: how much to bet on this particular idea. Conviction is a terrible position-sizing input because it is highest exactly when you are most anchored to a narrative. Standardising size means your results reflect your process rather than your mood, which is the only way a track record becomes readable at all.

Conviction is a terrible position-sizing input. It is highest exactly when you are most anchored to a story you already told yourself.

Where beginners break the rule is not usually greed; it is arithmetic drift. They set 1%, then take three correlated positions in EUR/USD, GBP/USD and EUR/GBP simultaneously and quietly run 3% on one underlying idea. Total portfolio heat — the sum of everything you would lose if every open stop were hit — matters more than the size of any individual line.

Set two numbers before your next session: risk per trade, and maximum total heat. Two percent per trade and six percent total is aggressive but survivable; one and three is conservative. Whatever you choose, write it where you can see it, because the moment you most want to exceed it is the moment it is most protecting you.