Intermediate
Position sizing and risk per trade
A simple framework for deciding how much to commit to a single idea.
Many traders cap the amount they are willing to lose on any one trade at a small percentage of their account — often between 0.5% and 2%.
- Decide the price at which your idea is wrong (your stop).
- Measure the distance between entry and stop.
- Divide your maximum acceptable loss by that distance to get a position size.
Example: with a $10,000 paper account and a 1% risk limit you would risk $100. If your stop is $2 below entry, size the position at 50 units.
Sizing does not guarantee outcomes — gaps and fast markets can move past a stop.
Capital at risk. Investments can fall as well as rise and you may get back less than you invest. Nothing on this page is investment advice. Read our risk disclosure.