The 1% rule
The 1% rule means never risking more than 1% of your capital on a single trade, with the loss measured to your stop loss.
With a €10,000 account, you lose no more than €100 if your stop is hit. It is not the position size that is capped at 1%, it is the potential loss.
The point is survival. Even after ten losses in a row, which happens to every strategy, your account is only down about 10%. At 5% per trade, the same streak costs about 40% of your capital.
There is nothing magic about the number: some traders prefer 0.5%, others go up to 2%. What matters is a fixed limit, written in your plan, that you never break to “win it back”.