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Loss recovery chart showing exponential difficulty of recovering larger losses
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The #1 Rule: Protect Your Capital
The difference between successful investors and those who lose money is not stock picking โ it's risk management.
Consider this: if you lose 50% of your capital, you need a 100% gain just to break even. But if you limit your loss to 5%, you only need a 5.3% gain to recover.
This is why professional traders follow the 1% Rule: never risk more than 1-2% of your total capital on a single trade.
With Rs 1,00,000 capital at 1% risk: Your maximum loss on any single trade = Rs 1,000. That's it. No matter how confident you are about a stock.