Crypto Trading Fundamentals

Section 7: Risk Management — The 2% Rule and Position Sizing

Most traders blow up their accounts not because they pick bad trades — but because they size positions wrong. The 2% Rule is the single most important concept for any trader to internalize.

📐

The 2% Rule: Never risk more than 2% of your total trading capital on any single trade. This means if you have a $10,000 account, your maximum loss on any one trade is $200.

Position Sizing Calculator

The formula: Position Size = (Account × Risk %) ÷ (Entry Price − Stop Loss Price)

Account Size	Max Risk (2%)	Entry	Stop Loss	Position Size
$1,000	$20	$42,000 (BTC)	$40,000	0.010 BTC
$5,000	$100	$42,000 (BTC)	$40,000	0.050 BTC
$10,000	$200	$42,000 (BTC)	$40,000	0.100 BTC
$10,000	$200	$2,800 (ETH)	$2,650	1.333 ETH
$25,000	$500	$2,800 (ETH)	$2,650	3.333 ETH

Set your stop loss BEFORE entering. Your stop isn't "I'll sell if it feels bad." It's a specific price level determined by the chart, calculated before you buy.

Tighter stop = larger position, wider stop = smaller position. A 1% stop lets you take twice the size of a 2% stop at the same risk. Use this math, not gut feel.

Never move your stop loss down to "give the trade more room." That's how $200 losses become $2,000 losses. If you're wrong, be wrong small.

Scale the rule to your tolerance. New traders should use 1%. Experienced traders with a proven edge can stretch to 3%. No one should ever exceed 5% per trade.

The full guide covers order types (limit, market, stop-limit), reading order books, avoiding liquidation on leveraged exchanges, and a 10-point pre-trade checklist.

Section 7: Risk Management — The 2% Rule and Position Sizing

Position Sizing Calculator

Read the full guide — it's free