Position sizing: size from your stop, not your gut
The single habit that keeps accounts alive: let your stop distance decide your size, so every trade risks the same small amount.
Daniel Pereira · Risk & Psychology · · 2 min read
Ask a struggling trader how big their position was and you'll hear a round number — two contracts, a thousand dollars of crypto — chosen because it felt right. Ask a professional and they'll tell you it depended on where their stop was. That difference is most of what separates surviving accounts from blown ones.
The rule
Decide first how much of your account you're willing to lose on one trade — usually a fraction of a percent to one percent. Then place your stop where your idea is wrong, based on the chart, not on how much you want to risk. Your position size is whatever makes the distance to that stop equal to your fixed risk.
- Set your risk per trade (e.g. 1% of the account).
- Place your stop where the setup is invalidated.
- Measure the distance from entry to stop.
- Size the position so that distance equals your 1%.
Tip: The stop sets the size, never the reverse
If the right stop makes the position feel too small to bother with, the trade is fine — your expectations are the problem. Never widen risk to justify a bigger size.
Done consistently, this means a loss is always roughly the same small number, no matter how volatile the market or how wide the stop. Ten losses in a row is a bad week, not a blown account. That's the whole point of the Risk Management System course, which gives you the spreadsheets to make the sizing automatic.
