Position Sizing
IntermediateHow to calculate proper position sizes for your trades.
Proper position sizing is the most important aspect of risk management. It determines how much capital you risk on each trade.
The 1-2% Rule
A widely accepted guideline is to risk no more than 1-2% of your account balance on any single trade. For a $100,000 account, this means risking $1,000–$2,000 per trade maximum.
Calculating Position Size
Position Size = (Account Balance × Risk %) / (Entry Price − Stop-Loss Price)
Example
| Parameter | Value |
|---|---|
| Account Balance | $100,000 |
| Risk per Trade | 1% ($1,000) |
| BTC Entry Price | $65,000 |
| Stop-Loss | $64,000 (−$1,000) |
| Position Size | 1 BTC ($65,000 notional) |
Daily Loss Limit
Remember that multiple losing trades in a day add up. If you risk 2% per trade and lose 3 trades, you're already at 6% daily drawdown — which would breach the 5% daily limit. Plan your maximum daily trades accordingly.
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