Position Sizing
A 1-minute lesson from the MarketPro academy, one of 22 in risk management.
Position sizing determines how much money a losing trade costs you. Strategy quality decides whether you have an edge; sizing decides whether you survive long enough for the edge to matter.
The most important number in trading
Position sizing determines how much money a losing trade costs you. Strategy quality decides whether you have an edge; sizing decides whether you survive long enough for the edge to matter. Most blown accounts die from oversized positions, not from bad analysis.
The fixed-fractional method
Risk a fixed percentage of your account per trade — commonly 0.5% to 2%. The formula:
Lots = (Account x Risk%) / (Stop distance in pips x Pip value per lot)
Example: a 5,000 USD account risking 1% (50 USD) on a EUR/USD trade with a 25-pip stop. Pip value is ~10 USD per standard lot, so: 50 / (25 x 10) = 0.20 lots. The Position Size calculator in this hub does this for you.
Finish this lesson in the MarketPro app
6 more sections of Position Sizing, plus all 320 lessons, the quizzes that check each one landed, and the streak that keeps you coming back. All of it is free on any account, including a free one. There is no paywall inside the academy.
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Not investment advice. Past performance is not indicative of future results.
Step 1 of 10 on Risk Management Mastery
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, Risk of ruin calculator, Drawdown calculator, Profit & loss calculator.
The whole academy is free in the app
All 320 lessons, 12 guided paths, quizzes and a daily streak. Free on every account, with vetted free signals alongside it.
Not investment advice. Past performance is not indicative of future results.