How the risk percentage per trade is calculated?

<p id="isPasted">To calculate the risk percentage per trade, determine the potential loss on a single trade and divide it by your total trading capital. This percentage represents the maximum amount you're willing to lose on a single trade.&nbsp;</p><p><strong>Here's a more detailed breakdown:</strong></p><ol><li>Determine your total trading capital: This is the total amount of money you have in your trading account that you're willing to risk.&nbsp;</li><li>Decide on your risk per trade percentage: A common guideline is to risk no more than 1-2% of your total capital per trade, but this can be adjusted based on your risk tolerance and trading strategy.&nbsp;</li><li>Calculate your maximum potential loss per trade: Multiply your total trading capital by the percentage you've decided to risk.&nbsp;</li><li>Determine the potential risk per share (or unit): For assets like stocks or futures, calculate the difference between the entry price and the stop-loss price (the price where you will exit the trade if it moves against you). </li></ol><p>Example:</p><ul><li>Total trading capital: $5,000</li><li>Risk percentage per trade: 2%</li><li>Maximum potential loss per trade: $5,000 * 0.02 = $100</li><li>Stop-loss price (for a long position): 25 pips below the entry price </li></ul><p><br></p><p><strong>Important Considerations:</strong></p><p><strong>Stop-loss order:</strong></p><p>Setting a stop-loss order limits the potential loss on each trade and is crucial for risk management.&nbsp;</p><p><strong>Risk tolerance:</strong></p><p>Your willingness to risk capital will vary based on your individual circumstances and risk tolerance.&nbsp;</p><p><strong>Trading strategy:</strong></p><p>Different trading strategies may have different risk percentages.&nbsp;</p><p><strong>Position sizing:</strong></p><p>The amount of capital you allocate to each trade is also a key factor in risk management.&nbsp;</p>