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Definition of '2% Rule'
A trading practice where an investor should not concentrate more than 2% of available capital on a single trade. To follow the 2% rule an investor first calculates 2% of the available trading capital, called the capital at risk. Brokerage fees for buying and selling shares are then factored into the capital at risk, and this figure is divided by the current share price. The resulting figure is the total amount of shares that can be purchased. If market conditions change and result in the trader losing the total value of that trade the downside exposure is only 2%, since the value of the original trade was limited to 2% of the total amount of trading capital available.
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Investopedia explains '2% Rule'
The 2% rule is a restriction created by investors in order to stay within the boundaries of a trading system. For example, an investor with $100,000 will purchase no more than $2,000 - or 2% of the value of the account - of a particular investment. By knowing the upper limit that can be risked, the investor can work backwards to determine the total number of shares that can be purchased. The investor can also use stop-loss orders to limit downside risk.
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Search results for '2% Rule'
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http://www.investopedia.com/university/forex-rules/rule3.asp
... Why the 2% Rule? The best way to avoid such a fate is to never suffer a large
loss. That is why the 2% rule is so important in trading. ...
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http://www.investopedia.com/articles/trading/03/111903.asp
... trading instrument to purchase, you would simultaneously calculate how much in losses
you could sustain on that trade without breaching your 2% rule. ...
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http://www.investopedia.com/articles/forex/08/forex-leverage.asp
... As you can imagine, the 2% rule means that you have a good chance of staying
in the game. The odds are stacked against a string ...
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http://www.investopedia.com/articles/retirement/03/110503.asp
... Rule 2: Aggregation of RMDs If you participate in more than one qualified plan,
your RMD for each plan must be determined separately, and each applicable ...
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http://www.investopedia.com/exam-guide/series-7/customer-accounts/plus-tick-rule.asp
... Indicators (Part 1 of 2); 9.18 Economic Indicators (Part 2 of 2); 9.19 Keynesian
Theory; ... 10.4 The Prudent Man Rule; 10.5 Opening a Brokerage Account; 10.6 Opening ...
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http://www.investopedia.com/articles/analyst/03/101503.asp
... discussion of new accounting rules will most likely be limited to a note entitled
"Recently Adopted Accounting Policies." Generally, each new rule is discussed ...
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http://www.investopedia.com/exam-guide/series-26/communications-customers/finra-conduct-rule-2212.asp
... Telemarketing Requirements No member or person associated with a member shall initiate
any telephone solicitation, as defined in paragraph (g)(2) of this rule: ...
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http://www.investopedia.com/articles/retirement/03/120303.asp
... considerably younger than the oldest beneficiary, this life-expectancy rule can
be a ... is readjusted each year by subtracting 1. Scenario No.2 The beneficiaries ...
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http://www.investopedia.com/ask/answers/04/040104.asp
... Rate of Return, Rule of 72, Actual # of Years, Difference (#) of Years. 2%, 36.0,
35, 1.0. 3%, 24.0, 23.45, 0.6. 5%, 14.4, 14.21, 0.2. 7%, 10.3, 10.24, 0.0. 9%, ...
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http://www.investopedia.com/exam-guide/finra-series-6/marketing-presentations/finra-conduct-rule-2212.asp
... Requirements No member or person associated with a member shall initiate any telephone
solicitation, as defined in paragraph (g)(2) of this rule, to: Time of ...
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