Position sizing

Basics

Position sizing is deciding how large a trade should be so that, if your stop is hit, you lose only the amount you planned to risk - no more. It is the single habit that separates traders who survive a bad streak from those who do not.

Key facts

Also known asLot sizing, trade sizing

Set byBalance × risk % ÷ stop distance

Typical risk0.5% to 2% of account per trade

RelatedR-multiple, drawdown, leverage

How it works

Three numbers set your size: your account balance, the percentage of it you are willing to risk on one trade, and the distance to your stop loss. Size falls out of those, it is never a number you pick first and hope works out. Sizing this way makes every losing trade cost the same, which is what stops one bad day from erasing a good month.

Fix the risk first and let the size be whatever the math says - often smaller than the ego wants, which is exactly the point.

Why it beats win rate

You can be right half the time and still grow an account, or right most of the time and still blow it, and the difference is usually size. Consistent sizing turns a positive edge into a smooth curve instead of a rollercoaster, and it is the first thing every prop firm checks in disguise through its drawdown rules.

Related terms

R-multiple Drawdown Leverage

Do the math

Position Size Calculator

Exact lot size for your risk →

Pip Calculator

What a pip is worth at your size →

Margin Calculator

Margin and effective leverage →

See it in your trades