Position Sizing: How Much Should You Risk Per Trade?
Calculate position size from account equity, planned risk and stop distance instead of choosing a trade size by instinct.
Position sizing connects an idea to a controlled financial risk. A good entry can still damage an account when the position is too large, while a reasonable loss can remain manageable when size is calculated before execution. The central question is not how much you hope to make. It is how much of the account you are prepared to lose if the stop is reached, including expected trading costs.
The basic calculation
Start with account equity and select a risk amount that fits your tested plan. Multiply equity by the chosen risk percentage to obtain the maximum planned loss. Then divide that amount by the monetary loss per unit between entry and stop. Instrument specifications matter: tick value, contract size, quote currency and leverage can change the result. Add estimated commission and slippage, then round down to a size the platform accepts.
Keep portfolio risk visible
Risk should be assessed across all open positions. Three trades in highly correlated markets may behave like one large trade. Set limits for total open risk, daily loss and consecutive losses. Move the stop only for a rule defined before entry; widening it after the trade increases risk beyond the original calculation. Recalculate size whenever equity or stop distance changes, and verify the platform’s calculator with a small test order.