Position sizing: the calculation that decides whether you survive

Most traders spend hours on entries and ten seconds on size. It should be the other way round: a good setup with the wrong size can knock you out of the market, an average setup sized correctly never will.

The formula

It all starts with one amount: what you accept to lose if your stop is hit.

1. Money at risk = capital × risk percentage. On 10,000 at 1%, that's 100.
2. Stop distance = gap between entry and stop, in pips or points.
3. Size = money at risk ÷ (stop distance × pip value for 1 lot).

Example on EURUSD: 100 at risk, 20-pip stop, one pip is worth about 10 per standard lot. Size = 100 ÷ (20 × 10) = 0.50 lot.

The classic mistake: fixing size, then the stop

Many traders trade "always 1 lot". The result: a 10-pip stop risks 100, a 40-pip stop risks 400. The same "1 lot" hides a risk that varies fourfold depending on the chart. The stop goes first, where the setup is invalidated. Size is calculated after.

The other mistake: resizing after a loss

After a loss, the temptation is to "win it back" with a bigger size. It's the most reliable sign of revenge trading. Your risk percentage doesn't change because your day is going badly. If it changes at all, it goes down.

Stop doing it in your head

The calculation takes ten seconds when calm and gets sloppy under pressure. TradeDiscipline includes a position size calculator: capital, risk, stop, and the size appears. And since your journal records every volume, the coach spots the day your size drifts from your plan.

Start for free and check whether your position size really matches your risk.