{"slug":"position-sizing","term":"Position Sizing","category":"Quant & Stats","definition":"Position sizing is deciding how much to trade so that a loss at the stop costs a fixed, survivable fraction of the account — typically 0.5% to 2%. Size is derived from the distance to the stop, not chosen first: a wide stop means a smaller position, a tight stop a larger one, for the same risk.","street":"Amateurs pick a size and hope the stop works; professionals pick the loss they can afford and let it dictate the size.","depth":["The arithmetic: risk 1% of a $10,000 account, so $100 per trade. Entry $50, stop $47 — a 6% distance — means each unit risks $3, so the position is 33 units, $1,650 of exposure. Move the stop to $48.50 and the same $100 buys 66 units. Leverage is then a consequence: how much margin that size needs, not a target. Our setups publish the stop distance as a share of entry so this calculation is one line.","Why it is the whole game: a strategy with 45% winners at 1.7 to 1 is profitable, but ten straight losses happen every few hundred trades, and at 5% per trade ten losses is 40% of the account and a psychological reset. At 1% it is a bad fortnight. The trap is sizing up after wins and down after losses — the opposite of what the numbers want."],"live":{"label":"Pattern trade plans, stop first","href":"/patterns"},"related":["r-multiple","risk-reward","drawdown","expectancy","leverage"]}