The maths that nobody shows beginners
If your account falls 10%, you need 11.1% to get back to zero. Fall 25% and you need 33%. Fall 50% and you need 100%. The hole gets deeper faster than it feels. Risk management is simply the practice of never letting the hole get that deep.
The 1% rule, in one sentence
On any single trade, the most you can lose if you are completely wrong is 1% of your trading capital.
With ₹1,00,000 of capital, that is ₹1,000 per trade. Not ₹1,000 of premium, not ₹1,000 of margin — ₹1,000 of loss if your exit level is hit.
Turning 1% into a position size
Position size is not a feeling; it is a calculation.
- Decide where the idea is wrong (your exit level). Say that is ₹20 away from your entry on a stock.
- Risk per trade = ₹1,000. Quantity = ₹1,000 ÷ ₹20 = 50 shares.
- For options, work with the premium you are willing to lose: if you would exit when a ₹100 premium falls to ₹60, you risk ₹40 per unit, so ₹1,000 ÷ ₹40 = 25 units — round down to whole lots.
Notice what happened: the chart decided the exit, and the rule decided the size. Your opinion about how good the trade looks never entered the calculation. That is the point.
Add a daily loss limit
Three 1% losses in a row is a normal day in the markets. Six in a row usually means your reading is off or your head is. A daily limit — many learners use 2–3% — closes the laptop before frustration starts choosing trades for you.
Common ways people cheat the rule
- Moving the exit further away after entering (“giving it room”).
- Averaging down without re-calculating the total risk.
- Counting a winning streak as “house money” and doubling size.
- Having a rule but not writing it down.
Practice this week
Open the free Lot Size Calculator on the Tools page, enter your real capital, and see what 1% actually allows. Most beginners are shocked by how small the honest number is — and that shock is the lesson.
This is education about a process. It is not a recommendation to trade anything.
Educational only, not investment advice. Arijit Capital is not SEBI registered. This lesson explains concepts for learning; it is not a recommendation to buy, sell or hold anything.
