Risk Management

Position Sizing

Determining how much capital, or how many lots/contracts, to allocate to a single trade — distinct from strategy or direction selection.

Position sizing is the decision of how much capital, or how many lots/contracts, to allocate to a single trade — a distinct decision from choosing a strategy or a directional view. It’s the mathematical link between risk tolerance and actual trade quantity.

See the fixed-percentage-risk formula with a worked example in Position Sizing Explained: How Much Should You Trade?.