What is Position Sizing?
Calculating how much of your account to risk on a single trade to keep losses within your predefined risk limit.
Position sizing is how professional traders control risk. Instead of deciding trade size by feel, you calculate it mathematically so each loss stays within a fixed percentage of your account.
The formula:
Position Size = (Account × Risk%) / (Entry − Stop-Loss)
Example:
Position Size = ($10,000 × 1%) / $1,000 = **0.1 BTC**
Maximum loss on this trade: $100 (1% of account) ✓
Why 1–2% per trade?
If you risk 1% per trade and lose 10 in a row (rare but possible), you're down ~10% — recoverable. If you risk 10% per trade and lose 10 in a row, you're broke.
Position sizing for prop firms:
Most prop firm challenges have a 5% daily drawdown limit. With a 1:2 R:R and 1% risk per trade, you'd need to lose 5 trades in a row before hitting the daily limit — very unlikely.