Crypto Position Sizing: The 1% Risk Rule Explained

Most traders blow up not because they're wrong too often, but because they bet too big when they are. Position sizing fixes that. It answers one question before every trade: how many coins should I buy so that, if I'm wrong, I lose only a small, fixed amount?

The 1% rule

The 1% rule says: never risk more than 1% of your account on a single trade. On a $5,000 account, that's $50 of risk per trade. Risk here doesn't mean position size — it means the dollar amount you lose if your stop-loss is hit. With 1% risk you can be wrong 10 times in a row and still have ~90% of your account intact.

The position size formula

You divide the dollars you're willing to lose by the distance (in price) to your stop-loss. A tight stop lets you trade a bigger size for the same risk; a wide stop forces a smaller size. The risk stays constant either way — that's the whole point.

Worked example

$5,000 account, 1% risk, long entry at $60,000, stop-loss at $58,800:

If price hits your stop, you lose exactly $50 — no more, no matter how scary the candle looks. That predictability is what lets professionals survive long losing streaks.

Leverage is not position size

A common beginner mistake is confusing leverage with risk. Leverage only changes how much margin you post — it does not change how much you lose if your stop is hit. Your loss is set by your position size and stop distance, full stop. Use the smallest leverage that lets you open the size your risk math allows, and keep your liquidation price far from your stop.

Frequently asked questions

How big should my crypto position be?

Big enough that hitting your stop-loss costs ~1% of your account — no bigger. Use the formula above or the calculator.

What risk % should I use?

1% is the standard. Aggressive traders go up to 2%; conservative traders use 0.5%. Above 2% per trade, a normal losing streak can do serious damage.

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