Position Sizing: The Foundation
The most important skill in trading — calculating exactly how much capital to risk on every single trade.
Position sizing is not about how much you can make — it's about how much you can lose without compromising your ability to keep trading. Master this and you will never blow an account.
The 1–2% Rule
Professional traders never risk more than 1–2% of their total account per trade. This sounds small, but it means you can lose 50 trades in a row and still have 60% of your capital.
Note
$5,000 account at 2% risk = $100 per trade. Twenty consecutive losses costs $2,000. Your account survives and you can recover. At 20% risk, five losses wipes the account.
The Formula
Position Size = (Account Balance × Risk%) ÷ Stop Loss%
- Account: $10,000
- Risk per trade: 1% = $100
- Stop loss distance: 2% from entry
- Position size: $100 ÷ 2% = $5,000 exposure
- At 10x leverage: $500 margin required
Why Traders Get This Wrong
Beginners size positions based on confidence. "I'm certain this one works" → 30% of account. Certainty in trading is an illusion — even 90% accuracy strategies have losing streaks.
Important
Never increase position size to recover losses faster. This is revenge trading — the fastest path to account destruction.
Interactive Calculators
Position Size Calculator
Calculate risk-correct size for any trade
Risk Amount
$100.00
Position Size
$5000
Margin Needed
$1000.00
Formula: Risk Amount ÷ Stop Loss % = Position Size
Risk / Reward Calculator
Verify R:R before entering any trade
Risk / Reward Ratio
4.00:1
Excellent — take this trade
Risk
2.34% ($1500)
Reward
9.38% ($6000)
Min Win Rate Needed
20.0%
Verdict
VALID TRADE
Discussion3 comments
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The No-Trade Zone filters are genius. I've been burned by signals during news events so many times. Good to know there's a filter for that.
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