I know this might sound like a stupid question ( I thought it was until I really thought about it), but I often hear people talking about only risk 1-2% of your total account value per trade. I assume most people think about it the way I did and figured if you have a $30k account then you should stick with buying $300 worth of whatever you are trading. Makes sense I guess, but what about if you set a 5% stop loss on entry ? If that is the case (obviously barring a scenario where your stop was blown past for some reason) aren't you actually risking much less then 5% ...actually more like .05% of $30k if my math is correct ? If possible I would appreciate it if someone more knowledgeable could double check my logic on the below. Assuming I am buying a stock priced @ $1 and during the time I hold it goes up in value to $1.50 wouldn't the math on the below be accurate? Account Balance: $30k 1% of Total Account w/o Stop Amount at Risk = $300 Purchasing Power = $300 Value @ Exit = $450 Potential Profit = $150 Risk:Reward Ratio = 2:1 1% of Total Account w/ 5% Stop Amount at Risk = $15 Purchasing Power = $300 Value @ Exit = $450 Potential Profit = $150 Risk:Reward Ratio = 1:10 1% Total Risk using 5% stop Amount at Risk = $300 Purchasing Power = $6000 Value @ Exit = $9000 Potential Profit = $3000 Risk:Reward Ratio = 1:10 Obviously additional slippage and commissions have to be factored in, but it looks like it makes a big difference depending on your view point so I thought would try and get some opinions.