What is “3-5-7” rule in trading?

 A risk management principle known as the “3-5-7” rule in trading advises diversifying one’s financial holdings to reduce risk.  

• 3% rule 

The 3% rule states that you should never risk more than 3% of your whole trading capital on a single deal. In order to safeguard themselves against big losses, traders attempt to restrict exposures on a single deal. 

• 5% rule 

According to the second element, you shouldn’t put more than 5% of your total trading capital at risk in the market at any given moment. This takes into consideration numerous holdings and helps avoid very high market or asset concentration. 

• 7% rule 

The final part states that your portfolio’s overall maximum loss should be at most 7% of your trading capital. This regulation emphasises the significance of placing stop-loss orders to reduce possible losses.