Enter your total account balance and the percentage of the balance you are willing to risk on a single trade into the calculator to determine the dollar amount at risk per trade.
Risk Per Trade Formula
The following formula is used to calculate the risk per trade.
RPT = AB * (RP / 100)
Variables:
- RPT is the risk per trade ($)
- AB is the account balance ($)
- RP is the risk percentage (%)
To calculate the risk per trade, multiply the account balance by the risk percentage and then divide by 100 to convert the percentage into a decimal.
What is Risk Per Trade?
Risk per trade is a key concept in risk management for trading. It represents the amount of money that a trader is willing to risk losing on a single trade as a percentage of their total account balance. This helps traders manage their risk and avoid significant losses by only risking a small portion of their account on any given trade. It is a fundamental practice in trading to ensure longevity and capital preservation.
How to Calculate Risk Per Trade?
The following steps outline how to calculate the Risk Per Trade.
- First, determine your total account balance (AB).
- Next, determine the percentage of the balance you are willing to risk (RP).
- Use the formula RPT = AB * (RP / 100) to calculate the risk per trade.
- Finally, calculate the Risk Per Trade (RPT) in dollars.
- After inserting the variables and calculating the result, check your answer with the calculator above.
Example Problem :
Use the following variables as an example problem to test your knowledge.
Account Balance (AB) = $10,000
Risk Percentage (RP) = 2%
