Risk and position sizing
On a small account the temptation is to risk more to make it "worth it". A fixed, small percentage per trade is what keeps the account alive long enough to learn.
When the whole balance is a few thousand dollars, risking a small slice of it on one trade feels pointless, so many new swing traders risk far more per idea than they would ever accept on a larger account. That is exactly backwards. The smaller the account, the less room there is to absorb a run of losses, and every trader meets a run of losses sooner or later.
The question is not "how much could I make?" It is "how much can I lose on this one idea and still be fine?"
Many risk-first traders use a fixed fraction of the account as the most they will lose on any single trade, often somewhere between 0.5% and 2%. The exact number is personal, but the point of a fixed number is that it is decided once, while you are calm, and then applied the same way every time.
A percentage also scales with you. When the account shrinks after losses, the dollar risk shrinks too, which slows the damage. When it grows, the dollar risk grows with it, without you having to make a new decision.
The rule only works if you translate it into a dollar amount before every trade.
That dollar figure is the most the trade may cost you if the stop is hit. It is not the size of the position. Those are two very different numbers, and mixing them up is the most common sizing mistake on small accounts.
Take a hypothetical account of $3,000 and a fixed risk of 1% per trade.
Notice that the position is roughly a quarter of the account, yet the planned loss is only $30. The stop distance, not the position value, decides the risk. If the only sensible stop were $36, the risk per share would be $4 and the same $30 would allow just 7 shares. That smaller trade is not a problem to fix by moving the stop; it says the setup may not suit a small account now.
This is why the stop has to come first. If you have not read it yet, our note on setting the exit before you buy walks through that order step by step.
The reason to keep the number small becomes clear when you count losses in a row. At 1% risk, ten losing trades in a row would leave a hypothetical $3,000 account near $2,710. Painful, but still in the game. At 5% risk per trade, the same ten losses would leave it near $1,800, and every later trade would need a much bigger gain just to get back to the start.
No percentage removes losses. A small one simply keeps them survivable, so you get enough trades to find out whether your process works.
Before every trade, write three numbers in your plan: the dollar risk, the risk per share, and the share count. If any of them is missing, the trade is not ready yet. A small account grows by staying intact first.
Education only, not financial advice. Your own risk limit should fit your finances and your experience.
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