The 1% rule is a guideline to risk no more than about 1 percent of total account equity on any single trade.
Some traders use up to 2 percent. The point is survival: at 1 percent, ten straight losses cost roughly 10 percent of the account, which is recoverable, whereas large risk per trade can be fatal.
Formula / example: ten 1% losses leave about 0.99^10 = 90.4% of the account