What Is Position Sizing in Trading?

Position sizing is deciding how large a trade should be so that, if your stop loss is hit, you lose a fixed, planned amount.

Formula

Position size = (Account balance × Risk %) ÷ (Stop distance × Value per unit)

Example

A $10,000 account risking 1% can lose $100. On EUR/USD with a 20-pip stop and $10 per pip per standard lot, each lot risks $200, so the position is 0.50 lots.

Why it matters

Consistent position sizing is what makes your results in R meaningful and keeps losing streaks survivable. Most blown accounts come from oversizing, not from bad entries.

Use the position size calculator. Related: pip, lot size, risk of ruin. See the trading glossary.