Position Sizing
Position sizing is the process of determining how many shares, contracts, or units to trade based on your account size, risk tolerance, and stop loss distance. Proper position sizing ensures no single trade can cause catastrophic damage to your account.
Formula
Example: Account: $10,000. Risk 1%. Entry: $100. Stop: $95. Position size = ($10,000 × 0.01) ÷ ($100 − $95) = 20 shares.
Why it matters for traders
Position sizing is arguably the single most important risk management discipline. Even a strategy with positive expectancy will blow up an account if position sizes are too large. Consistent 1–2% risk per trade is a standard professional guideline.
How Tradapt tracks this
Use Tradapt's Position Size Calculator to calculate exact position sizes before every trade. The tool handles stocks, futures (by contract value), and forex (by pip value).
Track this free in TradaptFrequently asked questions
What is the best position sizing method for trading?
The most common method is fixed fractional position sizing — risking a fixed percentage (typically 1–2%) of your account on every trade. This ensures losses are proportional to account size and prevents overexposure on any single trade.
How much should I risk per trade?
Most professional traders risk 0.5–2% of their account per trade. Prop firm guidelines typically require maximum 1–2% risk per trade. Risking more than 2% per trade significantly increases the probability of a catastrophic drawdown.