Why Most Traders Blow Up
The number one reason retail traders blow up their accounts is not a bad trading strategy — it is poor position sizing. You can have an edge that wins 55% of the time and still go broke if you size too large on losing trades. The 1% rule is simple: never risk more than 1% of your account on a single trade. This one rule, applied consistently, makes you nearly impossible to blow up.
The Formula
Shares = Risk $ ÷ (Entry Price − Stop Loss Price)
This gives you the exact number of shares to buy so that if you are stopped out, you lose exactly 1% of your account — no more.
Worked Example
Say your account is $25,000. You want to buy NVDA at $120.00, with a stop loss at $117.50. Here is the math:
- Risk $: $25,000 × 1% = $250
- Risk per share: $120.00 − $117.50 = $2.50
- Shares to buy: $250 ÷ $2.50 = 100 shares
- Total position value: 100 × $120 = $12,000 (48% of account)
If NVDA drops to $117.50 and your stop triggers, you lose $250 — exactly 1% of your $25,000 account. You can take this exact trade 100 times and lose every single one without blowing up.
Adjusting for Volatility
On high-volatility stocks, your stop will naturally be wider. A wider stop means fewer shares. That is not a problem — that is the math protecting you. A $250 risk on a $5 wide stop gives you 50 shares. A $250 risk on a $1 wide stop gives you 250 shares. The risk is identical; only the share count changes.
The goal of risk management is not to maximize profit on each trade. It is to stay in the game long enough for your edge to express itself over hundreds of trades.
Use the Zharks Calculator
The Zharks Trade Size Calculator in the Research tab automates this math. Enter your account balance, entry price, and stop price — it calculates your share count, total risk, and position value instantly. Use it before every trade.