Risk Management at Fundora: Understanding the 1% Rule

1. Fundora's Evaluation Criteria for 1% Risk Trading

At Fundora, we emphasize risk management ability from the evaluation stage to actual trading. Specifically, if a loss exceeding 1% of the trading capital occurs even temporarily, it may be subject to caution as a dangerous signal in fund management.

In the following situations, particularly careful evaluation will be conducted.

• Repeated entries with lots exceeding 1%
• Trades that clearly disregard risk control
• Cases of holding multiple highly correlated positions simultaneously and carrying excessive risk

At Fundora, from the Challenge stage, we evaluate traders' fund management ability from the perspective of "actually managing capital."

2. Why is 1% Risk Emphasized?

Behind the emphasis on 1% Risk Trading is the attitude of "protecting capital" as a professional trader. As stated in various professional books, it is said that "the risk per trade should be kept within 1-2% of the trading capital."

At Fundora as well, consistent position size management and calm withdrawal decisions are the keys to passing and promotion.

"Trading that passes a prop firm" is not "trading that makes a fortune in one go."

"Trading that calmly accumulates gains while limiting losses" is the attitude suitable for capital provision.

At Fundora, we emphasize "the ability not to lose big" more than "the ability to win big." Protecting capital while steadily building results is the attitude required of a professional trader.

3. What is 1% Risk Trading?

1% Risk Trading is a risk management method that limits the acceptable loss amount in a single trade to within 1% of your trading capital. Specifically, you adjust the trade size and stop loss in advance so that the loss does not exceed 1% of the account balance.

This rule aims to prevent large losses and help traders stay in the market longer. It is a basic strategy widely used by traders from beginners to experienced professionals.

4. Specific Calculation Methods and Examples

Setting trade size based on the 1% risk rule requires specific calculations like the following.

[Example]

• Trading Capital: 60 million JPY
• Allowable Risk: 1% (600,000 JPY)

In this case, the maximum loss amount per trade must be limited to within 600,000 JPY. For instance, if a position involves a risk of 300,000 JPY, you can hold a maximum of 2 such positions.

In addition, to control losses, you must always set a stop loss. The following three types of stop loss are common.

• Fixed-width Stop: A method of setting at a predetermined fixed value
• Trailing Stop: A method that fluctuates according to market movement
• Volatility Stop: A method adjusted according to market volatility

5. Key Points of 1% Risk Trading

To effectively utilize 1% Risk Trading, the following five points are important.

• Clear Understanding of Capital
  By accurately understanding your trading capital, you can appropriately calculate the 1% risk amount. This allows for planned trading without taking excessive risk.
• Always Set Stop Loss in Advance
  Setting a stop loss in advance can prevent unexpected loss escalation. This enables mechanical risk management that is not influenced by emotions.
• Accurate Calculation of Trade Size According to the 1% Rule
  Incorrect trade size can lead to risks exceeding 1%. Accurate calculation helps maintain consistency and safety in fund management.
• Attitude of Trading Calmly Without Being Swayed by Emotions
  Emotions tend to be a factor in escalating losses in trading. Incorporating 1% Risk Trading makes it easier to maintain calmness.
• Deep Understanding of the Importance of Risk Management
  Risk management is the foundation not only for short-term profit/loss but also for long-term survival strategy. Having this awareness leads to stable trading and growth.

Also, caution is required regarding the accumulation of risk when holding multiple highly correlated currency pairs simultaneously. Representative examples include EUR/USD and GBP/USD, XAU/USD (Gold) and Silver, USD/JPY and CHF/JPY.

6. Summary Regarding 1% Risk Trading

1% Risk Trading is a fundamental and important fund management method required of prop traders. At Fundora, we evaluate traders not just based on their performance, but from the perspective of "whether the trader can manage risk and be truly entrusted with capital" and "whether the trader can succeed in the market medium to long term, not just short term."

1% loss management is proof of "the ability to steadily build profits while controlling risk."

Approach today's single trade with the awareness of being a future professional trader.