What the rule says
The 1% rule is a simple risk guideline: never risk more than about 1% of your account balance on a single trade. On a €10,000 account, that means arranging each trade so that if the stop-loss is hit, you lose no more than roughly €100.
It is not a strategy for making money and it says nothing about entries. It is purely a survival rule, designed to ensure that no single trade, and no ordinary losing streak, can seriously damage your account.
Why such a small number
The power of the 1% rule is in how it tames losing streaks. Risking 1% per trade, ten losses in a row costs roughly 10% of the account — painful but easily recoverable. Risk 10% per trade instead, and the same ten losses effectively wipe you out. The difference is entirely in the sizing.
Losing streaks are inevitable over enough trades, even with a genuine edge. The 1% rule accepts this and sizes so that variance cannot end you before your approach has a chance to play out over many trades. It keeps your risk of ruin low almost by construction.
Honest limits and adjustments
The 1% figure is a guideline, not a magic number. Some traders use less, especially while learning; others adjust it to their circumstances. What matters is the principle: keep per-trade risk small enough that a bad run is survivable, whatever exact percentage you choose.
It is also worth being clear that the rule protects the account, not your emotions or your judgement. It cannot save you from a poor strategy, only from a single trade destroying you. Paired with genuine skill, it lets that skill compound; without skill, it simply makes losing money slower. Either way, it keeps you in the game, which is the first requirement for ever succeeding.