Position Sizing and Risk
Position size is how much to buy so that hitting your stop only costs a set, small share of your account (your risk per trade).
Quick answer
Decide the most you will lose on a trade (risk per trade), then size the position so that hitting your stop loses exactly that amount. Wider stops mean smaller positions; tighter stops allow larger ones.
What it means
Amount at risk = account balance x risk percentage. Position size = amount at risk / stop distance. The calculator below turns a simulated balance, risk percentage, entry, and stop into a position size and token quantity.
Why it matters
Fixed risk per trade is what keeps one bad trade from dominating your account. It also makes results comparable: every trade risks a similar amount, so your edge shows over time instead of being masked by wildly different bet sizes.
What happens if you ignore this
Position sizing is the difference between a survivable loss and a wipeout. Go 'all in' on one idea and a single wrong call can erase your account with no way to recover. Risk a small, fixed slice each time and no one trade can take you out — you always live to trade again.
Common mistakes
Sizing by 'how much I want to make' instead of 'how much I can lose if I am wrong', or ignoring fees and slippage that make the real loss larger than the stop suggests.
Story
Sam is sure about a token and puts 80% of his account into one trade to 'make it count.'
He expects one big win to grow his account fast.
The token drops 40%. His account is down 32% on a single trade, and he now needs a ~47% gain just to break even. A trader who risked 2% would be down less than 1%.
How much you make when you're right matters less than how much you lose when you're wrong. Fixed, small risk per trade keeps any one loss survivable.
Beginner tips
- Size from 'how much can I lose if I'm wrong,' not 'how much do I want to make.'
- A common starting rule is risking about 1-2% of your account per trade.
- Wider stop = smaller position. Let the stop distance set your size.
Common mistakes
- Risking a large, inconsistent share of the account per trade.
- Forgetting that fees and slippage add to the loss at the stop.