Risk Management at Fundora: Understanding the 1% Rule

Risk Management at Fundora: Understanding the 1% Rule

At Fundora, we emphasize proper risk management as a core evaluation metric to help traders succeed in the long term. Among our various risk protocols, the “1% Risk Rule” is considered the most essential and fundamental approach to managing capital. This article outlines how the 1% rule is evaluated within Fundora and offers practical guidance on how to apply it effectively.

1. Evaluation Criteria for the 1% Risk Rule at Fundora

From the evaluation phase to live simulations, Fundora places strong emphasis on a trader’s ability to manage risk. If a trader incurs a loss exceeding 1% of the total capital—even temporarily—it may be flagged as a risk management issue.

We conduct stricter assessments in the following scenarios:

• Repeated entries using position sizes that exceed 1% risk
• Trades that clearly ignore risk controls
• Simultaneous holdings of highly correlated positions that expose the account to excessive risk

Fundora evaluates traders not just as participants in a simulation, but as potential capital managers expected to uphold responsible practices.

2. Why the 1% Risk Rule Matters

The foundation of professional trading lies in capital preservation. Industry literature consistently states that “no more than 1–2% of trading capital should be risked on a single trade.”

At Fundora, consistent position sizing and disciplined trade exits are key factors for success and advancement. Passing a prop firm evaluation isn’t about making one big win—it’s about demonstrating the ability to compound returns steadily, while keeping losses minimal.

In short, we value “the ability to avoid big losses” even more than “the ability to make big gains.”

3. What is the 1% Risk Rule?

The 1% risk rule limits the potential loss on any single trade to no more than 1% of total trading capital. To achieve this, traders must adjust their position size and stop loss in advance to stay within the defined risk threshold.

This approach is a universal risk control method that helps traders—regardless of experience—remain in the market for the long term by preventing large drawdowns.

4. How to Calculate the 1% Rule: Example and Breakdown

To apply the 1% risk rule, here’s a step-by-step example:

Trading capital: ¥60,000,000

Permissible risk per trade (1%): ¥600,000

In this case, each trade must be capped so that the maximum potential loss does not exceed ¥600,000. For example, if each trade risks ¥300,000, the trader can hold up to 2 such positions simultaneously.

To control losses effectively, stop-loss orders must always be used. Common types of stop-loss setups include:

• Fixed Stop: A predetermined pip or point distance
• Trailing Stop: Adjusts with market movement
• Volatility Stop: Based on market volatility

5. Key Principles of the 1% Risk Rule

To apply this rule effectively, traders should follow these five principles:

• Know Your Capital Understanding your total capital is essential to accurately calculate your 1% risk level and avoid excessive exposure.
• Always Set Stop Losses in Advance Predefined stop losses help protect against unexpected losses and eliminate emotional decision-making during trades.
• Adjust Position Size According to the 1% Rule Misjudging trade size can easily result in exceeding the 1% limit. Accurate calculation ensures consistent and safe capital management.
• Remain Emotionally Detached While Trading Emotional trades often lead to amplified losses. Implementing the 1% rule supports discipline and clear thinking.
• Understand the Importance of Risk Management Risk control is not just about short-term results—it’s a survival strategy. The better you manage risk, the longer you can stay in the game.

Note: When holding multiple correlated positions, risk exposure increases. Be cautious when trading pairs like EUR/USD and GBP/USD, XAU/USD and Silver, or USD/JPY and CHF/JPY simultaneously.

6. Final Thoughts: Why the 1% Rule Matters at Fundora

The 1% risk rule isn’t just a guideline—it’s a fundamental principle at Fundora for evaluating whether a trader can be trusted with capital and operate sustainably in the markets.

We don’t just assess performance—we assess behavior.

Are you protecting your capital? Are you trading for the long term? The ability to consistently manage losses is what distinguishes professional traders.

So before you place your next trade, ask yourself:

Am I treating this like a professional?

Your journey as a prop trader starts with how you manage your 1%.