What Is the 1% Risk Rule in Crypto Position Sizing?

The 1% risk rule says no single trade may cost you more than 1% of your account. On a $3,000 account that is $30 - not the size of the position, but the most you lose if the stop is hit. It is the oldest piece of position sizing advice in trading, and it survives because it quietly removes the one outcome a beginner cannot recover from: a single trade that takes most of the money.

How do you calculate it?

Two steps. First, 1% of the account is your maximum loss - $30 on $3,000. Second, divide that by the distance to your stop to get the position size. A Bitcoin trade with a stop 3% below the entry gives $30 divided by 0.03, or a $1,000 position. If that position is larger than your cash, you either use a little leverage or, better, move on to a setup with a tighter stop.

Why 1% and not 10%?

Because of what a losing run does to the arithmetic. Ten straight losses at 1% leave you down about 10%; at 10% each, they leave you down 65%, and the account now needs to roughly triple to recover. Think of it like a bank balance you draw a fixed small amount from: the fund keeps working as long as the withdrawals stay small relative to it. Trading is survival first, and the people still trading in five years are nearly always the ones who kept each loss boring.

When does the rule bend?

Experienced traders sometimes use 2% on a setup they have tested for years, and many drop to 0.5% while learning or after a bad month. What does not bend is counting correlated positions together. Long Ethereum, Solana and a handful of smaller coins at 1% each is not 1% of risk - those coins mostly move as one, so treat the basket as a single trade.

Write your 1% figure on a sticky note by the screen and check every order against it before confirming. If an order would break the rule, cut the size rather than talk yourself into an exception - exceptions are how the rule stops working. Next: position sizing in full and leverage on a small account.