Meet two traders. Same strategy, same chart, same signals, same $10,000 Instant Funding account with a 5% maximum loss. The only difference is size. Trader A risks 1% on every trade. Trader B risks 5%, because “go big or go home.”

Their first trade hits the stop loss. Trader A is down $100 and shrugs. Trader B is down $500, and the account is gone. One trade. No second chance to prove the strategy works.

Welcome to Module 3. Module 2 taught you how to place trades. This module teaches you how to survive them, and survival starts with the one decision you fully control on every trade: how big to go. By the end of this lesson, you’ll know what the 1% rule means, how to turn a stop distance into a lot size on forex and gold, why 1% beats 5% even for confident traders, and the sizing mistakes which quietly double your risk.

Part 1: The Only Number You Control

Think about everything in a trade. You don’t control the news. You don’t control the spread, the slippage or whether buyers defend support today. You control three things: where you enter, where your stop sits, and your position size.

The entry and the stop come from the chart, as Module 2 showed. Position size comes from you. Get the size right, and a bad trade becomes a small, boring loss. Get the size wrong, and a single bad trade decides your month.

Part 2: What the 1% Rule Means

The 1% rule says you never lose more than 1% of your account on a single trade. On a $10,000 account, the most any one trade costs you is $100.

Notice what the rule doesn’t say. The rule isn’t about buying 1% of your account’s worth of EUR/USD, and the rule isn’t about margin. Beginners mix these up all the time. A trader with a 0.4 lot position uses a few hundred dollars of margin, but the risk is the amount lost if the stop gets hit. Risk is the number which matters.

The 1% figure isn’t magic either. Some professionals risk 0.25% per trade. Some aggressive traders risk 2%. But 1% sits in a sensible middle for most traders, and on a prop account, as you’ll see in Chapter 2, 1% or less fits the daily loss limit.

Part 3: The Sizing Formula

Here’s the formula you’ll use for the rest of your trading life:

Lot size = Dollar risk ÷ (Stop distance in pips × Pip value per standard lot)

Let’s run three examples.

EUR/USD. Your account is $10,000, and you risk 1%, or $100. Your stop sits 25 pips away. On EUR/USD, one pip on a standard lot is worth $10. So $100 divided by 25 pips times $10 gives you 0.4 lots. Familiar? This is the same trade from Module 2.

USD/JPY. Same $100 risk, a 30 pip stop. On USD/JPY, one pip on a standard lot is worth 1,000 yen. With USD/JPY at 150, 1,000 yen equals about $6.67. So $100 divided by 30 times $6.67 gives you 0.499 lots, which you round down to 0.49.

Gold. Gold moves in dollars, not pips. On most platforms, one standard lot of gold equals 100 ounces, so a $1 move costs or earns $100 per lot. Say your stop sits $8 away from entry. Your risk per lot is $800. Divide $100 by $800, and you get 0.125 lots. Round down to 0.12.

Two rules keep this formula honest. First, always round down, never up. Rounding 0.125 up to 0.13 turns a $100 risk into $104, and small leaks add up. Second, check the contract size of every new instrument before you trade. Right-click the symbol in Market Watch and choose Specification, as you learned in Module 2, Chapter 3. Index contracts differ from broker to broker, and a guess here is expensive.

Part 4: Why 1% Beats 5%

Every trader goes through losing streaks. Chapter 4 explains why streaks happen even to good strategies. For now, look at what ten losses in a row do to an account at different risk levels.

At 1%, ten losses leave you bruised but trading. You need about an 11% gain to recover. At 5%, the same streak takes 40% of the account, and you need a 67% gain to get back to the start. Remember Module 2, Chapter 2? The deeper the hole, the harder the climb.

On a prop account, the gap matters even more. With a 5% maximum loss, a trader risking 5% per trade has room for exactly one losing trade. A trader risking 1% has room for five, and a trader risking 0.5% has room for ten.

Part 5: Fixed Dollars or Fixed Percent?

Two schools exist. Fixed percent means you risk 1% of your current balance, so your dollar risk shrinks as you lose and grows as you win. Fixed dollar means you risk the same $100 on every trade, whatever happens.

On a personal account, fixed percent protects you well during drawdowns. On a prop account, many traders prefer a fixed dollar amount based on the starting balance, then cut the amount when they get close to the maximum loss. Chapter 3 shows why the distance to your loss floor matters more than your balance.

Whichever school you join, add one rule: after three losses in a row, halve your risk until you post a winning day. Smaller size slows the bleeding and calms the nerves.

Part 6: Sizing Mistakes Which Double Your Risk

Sizing by feel. “This setup looks great, so I’ll go 1 lot.” Confidence isn’t a stop distance. Every trade goes through the formula.

Same lot size on every trade. A trader who always trades 0.5 lots risks $100 on a 20 pip stop and $250 on a 50 pip stop. The lot size stays fixed, and the risk jumps around. The chart sets the stop, the formula sets the size.

Adding to a loser. Your EUR/USD long drops, so you buy more “at a better price.” Now you hold double the position, and your planned 1% risk has turned into 2% or more. Professionals add to winners, if at all, never to losers.

Correlated trades. You buy EUR/USD and GBP/USD at 1% risk each. Both pairs often move together because both trade against the dollar. In practice, you’ve placed one 2% bet on a weaker dollar. If two trades share one idea, split your 1% between them.

Pop Quiz

Your account is $25,000, and you risk 1% per trade. You want to buy GBP/USD with a 40 pip stop. One pip on a standard lot of GBP/USD is worth $10. What’s your lot size?

Your dollar risk is $250. Divide $250 by 40 pips times $10, and you get 0.625 lots. Round down to 0.62. Bonus question: you also want to buy EUR/USD on the same weak dollar idea. What now? Split the risk. Trade each pair at 0.5%, or $125, so the whole idea still risks $250. Two out of two? Top marks.

Why This Matters on a Moneta Funded Account

Look at the One-Step Challenge. The profit target is 10%, the daily loss limit is 3%, and the maximum loss is 5%. Risk 1% per trade with a 2:1 reward to risk ratio, and every win earns 2%. Five net winning trades reach the target. Five losses in a row, with no wins between, end the challenge.

Now risk 0.5% per trade. Each win earns 1%, so you need ten net wins, which takes longer. But the account survives ten straight losses. Ask yourself an honest question: would you rather pass slowly or fail fast? The challenge has no time limit. Your position size should reflect your patience, not your excitement.

Up Next: Chapter 2

Stay tuned, because the next chapter zooms in on the rule which ends more prop challenges than any other: the daily loss limit. You’ll learn how 3% on a $10,000 account becomes a $300 budget, how to size your trades so three bad fills don’t wipe out the day, why your personal daily stop belongs below the firm’s limit, and how open trades and slippage eat into your budget faster than you expect. Size for the worst day, and the good days take care of themselves. See you in class.

Disclaimer: This content is for educational purposes only and does not constitute financial advice. Trading forex and CFDs involves significant risk of loss. Figures used in examples are for illustration only. Pip values and contract sizes vary by instrument, exchange rate and platform. Moneta Funded accounts use simulated capital for evaluation purposes. Challenge rules are subject to the Terms and Conditions.