Rule 3-5-7: The Secret of Traders Who Don't Go Broke

Let’s be clear: most traders lose money because they don’t know how to say no. They risk everything on a trade, forget about the stop loss, and boom… their account is wiped out.

The 3-5-7 rule is the opposite: it’s the survival protocol.

The 3: Your Disaster Airbag

Never risk more than 3% of your capital on a single trade.

Think of it this way: if you have $10,000, each trade exposes a maximum of $300. Yes, just $300 per trade.

Why? Because even the best traders make mistakes. But if you lose 3%, your account still has $9,700. You’re still in the game. You can try again.

On the other hand, if you risk 30% on a trade and lose, your account drops to $7,000. Now you need a 43% gain just to recover. That’s psychologically devastating.

The 5: Diversification Is Life

Your total exposure in open markets should not exceed 5% of your capital.

Example: you have $50,000. You shouldn’t have more than $2,500 exposed in total across BTC, ETH, altcoins, futures—all together.

This forces you to think big picture. It’s not “Should I enter this trade?” but “Should I enter considering what I already have open?”

More discipline = less risk of ruin.

The 7: Gains Should Be Greater Than Losses

Aim for at least 7% profit on successful trades.

To be profitable in the long run, your winning trades need to be substantially larger than your losing ones.

If you lose 3% on two trades, you lose $600 on $10,000.
But if you gain 7% on just one trade, you earn $700.

That’s net profit. That’s the model that works.

Why It Really Matters

This isn’t a random rule. It was created because traders who follow it stay alive after 10 years. Those who don’t, don’t.

It’s simple: psychology + math.

• Psychology: The 3% is small enough to lose a trade without panic.
• Math: The 7% is big enough for your gains to offset your inevitable losses.

It’s not sexy, but it works. And in trading, “working” is all that matters.