1% Risk Rule Explained with Example

What is the 1% Rule?

The 1% rule means you should not risk more than 1% of your account balance on a single trade.

This includes your stop-loss risk, not your position size.

Example:

• Account size: $10,000

• 1% risk: $100

This means if your stop loss hits, your maximum loss on that trade should be around $100.

Why does Funds.pro enforce the 1% rule?

Prop firms are not brokers.

We manage risk for multiple traders at the same time.

The 1% rule exists to:

• Prevent gambling behavior

• Protect the firm’s capital

• Ensure traders trade consistently, not aggressively

• Identify disciplined traders who can scale long-term

Traders who risk too much usually pass once and fail later. The rule filters that behavior.

Is the 1% rule mandatory or just recommended?

It is a strong risk guideline, not a forced per-trade lock.

However, repeated behavior that clearly exceeds 1–2% risk per trade can be flagged by the Trade Ethics Team.

If a trader constantly risks 5–10% per trade, the account may be reviewed or terminated.

Does the 1% rule apply in challenge and funded stage?

Yes.

The same risk discipline is expected in:

• Phase 1

• Phase 2

• Funded account

Funded accounts are monitored more strictly because real capital allocation is involved.

How is 1% risk calculated?

Risk is calculated based on:

• Stop-loss distance

• Lot size

• Instrument volatility

It is not calculated based on margin used.

Margin usage and risk are different things.

Example:

You can use 50% margin but still risk only 1% if your stop loss is tight.

Can I ever risk more than 1%?

Occasionally risking slightly more is not an instant breach.

But if the system detects:

• Consistent over-risking

• Revenge trading

• All-in style trades

Then the account can be flagged for excessive risk behavior.

Is this rule related to the 70% margin rule?

They are connected but not the same.

• 1% rule = how much you can lose per trade

• 70% margin rule = how much margin you can use

High margin usage + high risk together is considered gambling.

Why does this rule help traders long term?

Because:

• One bad trade will not kill the account

• Drawdowns stay controlled

• Psychology stays stable

• Passing one phase is not luck-based

Most profitable prop traders survive because of risk control, not win rate.

What happens if I ignore the 1% rule?

Possible outcomes:

• Trade ethics review

• Payout rejection

• Account termination in funded stage

Especially if the behavior looks intentional or repeated.

Final note

Funds.pro is designed for professional risk-managed trading, not high-risk gambling strategies.

If your strategy depends on risking large portions of capital per trade, this platform may not be suitable for you.

For traders who respect risk, the 1% rule actually makes payouts easier and sustainable.