Risk per Trade

Risk per trade is the amount of account equity a trader is willing to lose on a single position if the stop-loss is hit, usually stated as a fixed percentage of the account rather than a cash figure. Defining it first is what makes position sizing possible: once the risk budget and the stop distance in pips are known, the lot size follows arithmetically. Expressing risk as a percentage means position size shrinks automatically after losses and grows as the account recovers, which slows the compounding of a bad run. It also makes trades comparable — two setups risking the same percentage carry the same weight regardless of pair, stop distance, or volatility.