The 4% rule is one of the most renowned formulae in Forex trading. It can be applied in any type of trading – from short-term Forex trades, to long-term investments. This rule states that a trader should never risk more than 4% of their account balance on any single position. By using the 4% rule, a trader can manage their risk exposure and set a limit to the drawdown of their account. This simple, yet effective method can be used by both novice and experienced traders alike, as it encourages consistent risk management and profitable trading.