Glossary · Prop-firm trading
Risk per trade
What one trade loses if its stop is hit, as a share of the account.
The number every other number follows from. A trade's size is the risk per trade divided by the distance to the stop; a losing run's cost is the risk per trade times its length; the risk per trade a daily limit survives is the limit divided by the losses one bad session can hold.
Measured against the account label, a 100,000 account looks like it has 100,000 to lose. Measured against the few thousand between equity and the daily line, it is a small account; both are the same account.
Worked example
At 1% a trade on a 100,000 account, each stop costs 1,000. A 5% daily limit holds four consecutive losses with room to spare; the fifth reaches the line. At 2.5% a trade, the second loss does. A 45% win rate at two-to-one reward-to-risk expects 0.35R a trade, so a 10% target takes about 29 trades at 1%.
- Also called
- risk per position, R