In a traditional account, you risk what you afford to lose. In a prop account, you risk what you afford to *draw down*. This distinction is the difference between keeping your account for years or losing it in minutes.
The 0.5% Rule
Most retail traders risk 1-3% per trade. For a funded trader, 1% is too high. If you hit a 5-trade losing streak (which is mathematically inevitable), you are halfway to losing your account. We recommend starting with 0.25% to 0.5% risk per trade.
Managing Daily Drawdown
Prop firms often have a 5% daily drawdown limit based on your equity or balance at the start of the day. If you reach -4%, you MUST stop trading for the day. No "revenge trading" to get back to break-even. The goal of today is to survive so you can trade tomorrow.
Pro Tip: The Lot Size Buffer
Always subtract commission and a small amount of expected slippage from your lot size calculation. If the math says 1.0 lots, trade 0.9.
Scaling Your Risk
Once you have a 3-5% profit buffer on your account, you can slowly scale your risk from 0.5% to 1%. However, the moment your account falls back to your initial balance, you must revert to defensive 0.25% risk.