Drawdown & the 1% Rule

Learn Drawdown & the 1% Rule — part of our Risk Management series on Trading Bite. Free trading education for Pakistan, India & Gulf traders. Educational use only; not financial advice.

Surviving losing streaks

Drawdown is the peak-to-trough decline in your account equity. A 20% drawdown requires a 25% gain to recover; a 50% drawdown requires a 100% gain to recover.

Drawdown

The 1% rule (guideline)

Risk no more than 1% of equity per trade while learning. Ten consecutive losses = ~10% drawdown — painful but recoverable. At 10% per trade, ten losses can wipe most accounts.

Reduce size after drawdowns; do not increase to “win it back.”