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Position sizing

In one line: Picking how big a trade is, based on how much you are willing to lose.
Watch: What to Do When Your Stop Looks Too Wide: Size Down, Don't Move It · open on YouTube · 1-minute Short
More videos on this (1)

The core formula is simple: position sizeHow much you buy or sell in one trade. = amount you risk ÷ distance to your stop.

Example with round numbers: account 10,000, you choose to risk 100, stop is 2 away from entry. Size = 100 ÷ 2 = 50 units. If the stop fills where you placed it, you lose about 100 plus costs.

Position sizing does not make a bad strategy good. It decides how long you survive while you find out. The Trade Compass does this calculation for you.

Example (illustration, no stamp)
Size = risk amount ÷ stop distance. 100 ÷ 2 = 50 units.

Further viewing

External videos are for viewing only: we don't use them as a factual source.

External video, for viewing onlyTrading Psychology Starts With Risk Management
Stick Trader · open on YouTube

Related

Sources & studies

  1. Investopedia (secondary): Position sizing

Risk and position sizingRisk per tradeStop-loss

Last checked: 2026-11-04 · Educational, not financial advice.

Education only, not financial advice. No signals. Backtests are hypothetical: real trading can be worse. Past results don't predict future results.