To calculate risk when trading, you can use two techniques: risk per trade and risk-reward ratio. Deciding how much to risk depends on your personal preference and circumstances.
Some traders would suggest not risking more than 1% of your capital per trade, while others go up to 10%. Keep in mind that, if you’re on a big losing streak, the amount you’re risking per trade will have a huge effect on your capital and the ability to claw back losses.
We explain the other technique – the risk-reward ratio – below.