https://kudo.com/_next/static/chunks/2470.97a7dbc7dfd877fb.js

1!function(){try{var e="undefined"!=typeof window?window:"undefined"!=typeof global?global:"undefined"!=typeof globalThis?globalThis:"undefined"!=typeof self?self:{},t=(new e.Error).stack;t&&(e._sentryDebugIds=e._sentryDebugIds||{},e._sentryDebugIds[t]="27af7235-6e6d-4978-9e12-309cb42b7986",e._sentryDebugIdIdentifier="sentry-dbid-27af7235-6e6d-4978-9e12-309cb42b7986")}catch(e){}}();"use strict";(self.webpackChunk_N_E=self.webpackChunk_N_E||[]).push([[2470],{12470:e=>{e.exports=JSON.parse('{"seo":{"title":"Risk Per Trade Explained | Kudo Academy","description":"Understand risk per trade: how capping what one trade can lose, as a small percentage of your account, protects your capital. A free Kudo Academy lesson."},"title":"Risk per trade","intro":"Risk per trade is the limit you set on how much a single trade can cost you if it goes against you. Framed as a small slice of your account, it stops any one loss from doing serious damage. It is the quiet habit that keeps a trading account alive long enough to learn.","blocks":[{"type":"heading","text":"What risk per trade means"},{"type":"paragraph","text":"Every trade has a level where you would accept that it has not worked and close it. The gap between your entry and that exit, multiplied by the size of your position, is the amount you have put at stake. Risk per trade is a ceiling you place on that amount before you open the position, decided calmly in advance rather than in the heat of a moving market."},{"type":"callout","text":"Setting your maximum loss first turns risk into a choice rather than a surprise. Your position size then follows from the limit, instead of the limit being whatever the position happens to imply."},{"type":"heading","text":"Why the cap is the foundation of survival"},{"type":"paragraph","text":"Losing trades are a normal part of the process, not proof that your method is broken. When each loss is small next to your account, a run of them is survivable and you are still there to trade the next day. When a single loss can take a large bite, one poor trade can undo a long stretch of careful progress. Capping the downside on every trade is what keeps an account alive long enough for a method to prove itself."},{"type":"paragraph","text":"In practice the cap is written as a percentage of the account and then converted into cash. Many traders keep it small, illustratively around 1 to 2 percent, so no single trade carries outsized weight. Suppose, as an illustration, an account holds 5,000 units of currency and the cap is 1 percent: one percent of 5,000 is 50, so no trade would be arranged to lose more than 50 units, and at 2 percent the figure would be 100. Because the cap is a percentage, that cash amount rises and falls with the balance on its own."},{"type":"heading","text":"See it in money terms"},{"type":"paragraph","text":"The profit-and-loss calculator below turns an example position into a cash result. Enter a sample trade and see how the size of the price move and the size of the position combine, so a percentage cap stops being an abstract rule and becomes a figure you can picture before you ever place an order."}],"quiz":[{"question":"What does \'risk per trade\' refer to?","options":["The total profit a trade is expected to produce","The number of positions you hold at once","A cap on how much a single trade can lose if it moves against you","The commission charged when you open a position"],"answer":2,"explanation":"Risk per trade limits the potential loss on one position, set before it is opened."},{"question":"Why do many traders treat capping the loss on each trade as a foundation?","options":["Because keeping each loss small lets an account survive a normal run of losers","Because it removes any chance of losing on a trade","Because it locks in a fixed profit on every position","Because it lets them ignore position size entirely"],"answer":0,"explanation":"Small, capped losses let an account absorb an inevitable losing streak and keep trading."},{"question":"An account holds 4,000 units and the chosen cap is 1 percent. As an illustration, what is the most a single trade would be set up to lose?","options":["400 units","4 units","100 units","40 units"],"answer":3,"explanation":"One percent of 4,000 is 40, so the cap works out to 40 units for that balance."}]}')}}]);