Risk Per Trade
The percentage or dollar amount of your account you are willing to lose on a single trade. Typically 0.5–2% for most traders.
Risk per trade is the maximum you agree to lose if the stop-loss is hit. Keeping this constant converts a string of losses into a manageable drawdown rather than an account wipeout.
A 1% rule means 10 consecutive losers cost only ~10% of capital. At 10% risk per trade, the same streak wipes out about 65%. Small, consistent risk per trade is what allows compounding to work over time.
On the desk
$25,000 account, 1% risk per trade = $250 maximum loss. Combined with a stop placed $2 below entry, position size = $250 / $2 = 125 shares.