Most traders blow up their accounts not because they pick bad trades — but because they size positions like gamblers.

Here's the single rule that fixed that for me.

The 2% Rule

Never risk more than 2% of your total account on a single trade.

That's it. Simple to understand, hard to follow, and it will save your account.

How It Works (Real Example)

Say you have a $10,000 account.

• Max risk per trade: $10,000 × 0.02 = $200

• You spot a setup on AAPL at $185 with a stop loss at $183

• Risk per share: $185 - $183 = $2

• Position size: $200 ÷ $2 = 100 shares

That's your max. Not 500 shares because you "feel confident." Not 300 because it "looks like a sure thing." 100 shares. Period.

Why It Works

Let's say you hit a rough patch and lose 10 trades in a row (it happens to everyone):

• Without the rule (risking 10-20% per trade): Account destroyed. You're done.

• With the 2% rule: You lose ~18% of your account. Painful, but survivable. You still have capital to recover.

The math protects you from yourself.

Common Mistakes

❌ "I'll just risk 2% on this one but go bigger on the next one" — Consistency is the entire point. One exception becomes a habit.

❌ "2% is too small, I'll never make money" — If your strategy has an edge, compounding handles the rest. A 2% risk with a 2:1 reward ratio means a 4% gain on winners.

❌ "I'll move my stop loss to avoid getting stopped out" — That's just removing your risk management. You accepted the risk when you entered. Honor it.

The Bottom Line

Position sizing isn't exciting. Nobody posts about it on social media. But it's the difference between traders who last and traders who don't.

Apply the 2% rule on your next 20 trades and see what happens to your consistency.

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Want the full breakdown on risk management, position sizing formulas, and trading psychology? Check out the Pro Trading Masterclass.