Position Sizing

Glossary · Quant & Stats

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.

"Amateurs pick a size and hope the stop works; professionals pick the loss they can afford and let it dictate the size."

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.

Pattern trade plans, stop first

Related jargon

Questions

What is Position Sizing in crypto trading?

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.

How would a trader say it?

Amateurs pick a size and hope the stop works; professionals pick the loss they can afford and let it dictate the size.

Part of the Crypto Jargon glossary — every term, decoded the way a trader would say it.

Crypto Jargon

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