Position sizing: risk a fraction, survive everything

Size from the stop, not from conviction

Decide first where the idea is wrong — the stop level. The distance from entry to stop is the risk per unit. Then choose how much of the account that risk may consume (many desks use a small fixed fraction per trade) and divide: that quotient is your size. Confidence moves nothing in this formula; only distance and fraction do.

A worked sketch (example numbers)

Suppose the account is 10,000 units and your fraction is 1%: one trade may lose 100. If the stop sits 5% below entry, the position can be 2,000 notional — a 5% adverse move on 2,000 loses exactly 100. Change the stop distance and the size changes with it; the risk stays 100. That constancy is the entire point.

Concurrent risk is the real risk

Five positions each risking 1% can lose 5% together — and correlated positions fail together. Cap total open risk as one number, and count hedged or same-direction exposure honestly instead of per-ticket.

Losses are tuition only if you survive them

No edge pays without drawdowns. Fixed-fraction sizing turns a ten-loss streak from an account-ending event into a bad fortnight. The traders who last are not the ones who avoid losing — they are the ones whose sizing made losing affordable.

Risk note: cryptocurrency trading, leveraged perpetual futures, and automated algorithmic strategies carry significant risk of rapid and total financial loss. Never risk funds you cannot afford to lose completely. Nothing in this lesson is investment advice, a recommendation, or an offer to sell any product.