Position sizing: the decision that outlives your entries
Beginner7 min readUpdated February 2026
Risk per trade, not size per trade
Professional sizing starts from the amount of capital you are prepared to lose on a single idea, not from the number of units you feel like trading. Fix the risk first, place the stop where the idea is invalidated, and let those two numbers determine the position size.
The drawdown arithmetic
Losses compound against you harder than gains compound for you. A 20% drawdown needs a 25% gain to recover. A 50% drawdown needs 100%. Keeping per-trade risk small is not caution for its own sake — it is what keeps the recovery maths survivable.
- Decide the maximum you will risk on one position before you open it.
- Set the stop at the level that invalidates the idea, not at a round number.
- Size the position from those two inputs rather than from conviction.
- Cap total exposure across correlated positions, not just each one alone.
Correlation is hidden size
Three positions in different symbols that all express the same view on the dollar are one position wearing three names. Aggregate exposure by theme, not by ticker, or your real risk will be several times what your per-trade rule suggests.
This material is educational and does not constitute investment advice. Trading leveraged products carries a high level of risk and can result in the loss of your capital.