Risk Management in Crypto: The 1% Rule and Position Sizing

Most traders focus obsessively on entries. Professional traders focus obsessively on risk. The difference is everything. Here's the framework that separates traders who survive from those who don't.

The 1% Rule

The single most important rule in trading:

Never risk more than 1% of your total account on a single trade.

On a $10,000 account, maximum risk per trade = $100.

This sounds conservative. It's actually the reason professional traders stay in the game long enough to compound. At 1% risk per trade, you'd have to lose 100 trades in a row to be wiped out. At 10% risk, 10 losing trades destroys your account.

Position Sizing Formula

Given a stop loss distance, here's how to calculate your position size:

Position Size = (Account × Risk %) ÷ Stop Loss Distance

Example:

• Account: $10,000
• Risk: 1% = $100
• Entry: $50,000 (BTC)
• Stop Loss: $49,000 (distance = $1,000)

Position size = $100 ÷ $1,000 = 0.1 BTC

If your stop is hit, you lose exactly $100 (1% of account). Not more.

Risk:Reward Ratio

Never take a trade where your potential reward isn't at least 2× your risk.

1:2 Risk:Reward means:

• Win 40% of trades → Still profitable
• Win 50% of trades → Very profitable

DeepPair's AI always outputs a Take Profit and Stop Loss. Before accepting a signal, calculate the risk:reward ratio. If it's below 1:1.5, consider skipping it.

Compounding With Risk Management

The power of 1% risk + consistent execution:

Month	Account (50% win rate, 1:2 R:R)
Start	$10,000
Month 3	$11,250
Month 6	$12,656
Month 12	$16,010

No blow-ups. No emotional spirals. Steady, compounding growth.

How DeepPair Helps

DeepPair always generates a stop loss with every signal. Use it. Feed that stop loss distance into the position sizing formula above. The AI's confidence score also signals how aggressively to size — a 90% confidence signal deserves a full position; a 65% confidence signal might warrant half.