Risk per trade in gold trading

Risk per trade is the predetermined amount a trader is willing to lose on one position. It is normally expressed as a percentage of equity and converted into dollars before each trade. The stop-loss distance and the lot size are then chosen so that a stop hit loses exactly that amount, no more. It is the foundation of position sizing and the main defense against ruin.

How it applies to gold trading

On a $10,000 account, 1% risk is $100. If the planned stop on a gold trade is $12 away, the position size is $100 ÷ ($12 × 100) = 0.08 lots. If the next setup needs a $30 stop, the size falls to 0.03 lots; the risk stays $100. This is why risk per trade is a better anchor than lot size: it adapts automatically to volatility and to the account’s changing size.

Fixed fractional risk also means losses shrink as the account shrinks and grow as it grows. Ten consecutive 1% losses cost 9.6% of the account, not 10%, and a trader is never mathematically wiped out by a streak, though the psychological limit arrives sooner.

A common mistake

Setting risk per trade at 1% but then “adding to” a losing position or opening a second correlated gold trade, so the real risk is 2% or 3%. Risk is counted per idea, not per ticket.

See also: Position sizing, Stop-loss, R multiple, Drawdown.

Frequently asked questions