The 2% Rule: How to Never Blow Up Your Trading Account

The number one reason traders fail is not bad stock picks — it's poor risk management. The 2% rule is simple: never risk more than 2% of your total capital on a single trade.

How It Works

If your account size is ₹1,00,000, you should never risk more than ₹2,000 on any single trade. This means setting your stop-loss accordingly.

Calculating Position Size

Position Size = (Account Size × Risk %) ÷ (Entry Price - Stop Loss Price)

Example: Account = ₹1,00,000, Risk = 2% = ₹2,000, Entry = ₹500, Stop Loss = ₹480 (₹20 risk per share) Position Size = ₹2,000 ÷ ₹20 = 100 shares

Why This Matters

Even if you lose 10 consecutive trades (which is rare), you'd only lose 20% of your capital. This gives you the staying power to recover.

Use Our Calculator

Visit our Resources page to use the Position Size Calculator and automate these calculations!