Position Sizing Basics
A 1-minute lesson from the MarketPro academy, one of 16 in orders and execution.
Position sizing refers to deciding how much capital to allocate to a single trade or investment. It is one of the most important risk-management decisions a trader makes, often more consequential than the choice of which stock to trade.
Position sizing refers to deciding how much capital to allocate to a single trade or investment. It is one of the most important risk-management decisions a trader makes, often more consequential than the choice of which stock to trade.
Why Position Size Matters
- Even a well-considered trade can result in a loss, so the size of any single position determines how much that loss affects the overall account.
- Consistently oversized positions can lead to large drawdowns from just a few unfavorable trades in a row.
- Appropriately sized positions allow a trader to remain in the market and apply their approach across many trades, rather than risking a large setback from one outcome.
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Not investment advice. Past performance is not indicative of future results.
Lesson 12 of 16 in Orders and execution
Run the numbers while this is fresh
The arithmetic in this category has a free calculator on this site, no sign-up and nothing leaves your browser: Position size calculator, Margin calculator, Leverage calculator.
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Not investment advice. Past performance is not indicative of future results.