The 1% risk rule in forex is a widely used risk management strategy that helps traders protect their capital. It simply means that a trader should never risk more than 1% of their total trading account on a single trade. This rule is designed to minimise losses and ensure long-term survival in the market, especially during losing streaks.

For example, if a trader has a $1,000 account, they should risk only $10 on any one trade. This risk is calculated based on the distance between the entry price and the stop-loss level. By adjusting the position size accordingly, traders can control how much they stand to lose if the trade goes against them.

The main advantage of the 1% rule is that it prevents emotional decision-making and overtrading. Even if a trader experiences multiple consecutive losses, the account will not be significantly damaged, allowing them to recover over time. It also promotes discipline and consistency, which are essential for success in forex trading.

Overall, the 1% risk rule is a simple yet powerful technique that helps traders manage risk effectively, preserve capital, and trade with a clear, controlled mindset.