I look at risk percentage based on the ability to recover from a catastrophic event, like deductibles on insurance policies. The higher the deductible, the lower the cost of insurance because the customer takes on more of the risk.

In theory, 5% would allow roughly 20 losses in a row before busting out. In reality this number is much less since even a 50% loss in trading capital requires a 100% profit to break even.

So how much can you afford to add to your account after a bad loss, or a string of reasonable ones? The more you can re-fund the account, the greater risk that account could sustain.

Higher percentage risk levels give trades either 1.) more room to breathe via a larger pip stop loss relative to a fixed position size, or 2.) a larger position size relative to a fixed pip loss setting. Either scenario produces a statistical edge; time for the trade to mature or, maximum profit from tighter stops (loss and take profit).

I suppose there is a mathematical formula that could express which option produces the better return for a given % risk value.

5% works for my trading account and ability to re-fund it.