Preventing large drawdowns:

By capping risk at 2%, you can avoid significant account drawdowns, which can be devastating to your trading career. A 10% maximum drawdown limit, for instance, would require a much smaller account size to maintain the same level of risk.

Proper risk management:

The 2% rule is a simple and effective way to manage risk, making it accessible to beginners. It’s a basic principle that can be applied to any trading strategy, regardless of market conditions or account size.

Avoiding over-trading:

Risking too much per trade can lead to over-trading, which can exacerbate losses and increase the likelihood of account destruction. By limiting risk, you’re more likely to trade with discipline and avoid impulsive decisions.

Focus on trading skill improvement:

As your trading skills improve, you can gradually increase your position size and risk percentage, allowing you to take advantage of better opportunities while still maintaining a safe and sustainable trading approach.   In summary, risking 2% per trade provides a balanced approach to risk management, allowing you to:

• Survive losing streaks
• Prevent large drawdowns
• Practice proper risk management
• Avoid over-trading
• Focus on improving your trading skills

  This approach is  applied to any trading strategy and account size. Making it a versatile and effective principle for traders of all levels.

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