position sizing for people who hate math

most people size trades on vibes. as a very smart investor, i once sized on vibes too. the vibes were wrong.

the rule

pick the loss first. before the trade, the method fixes how much of the account would be lost if the idea is wrong. that number stays small and fixed.
a common convention is 0.5–1% of the account per trade. that’s a convention, not a recommendation.
that number is the amount lost, not the amount put in. in my experience, mixing the two up is how a lot of accounts die.

the division

position size = risk amount ÷ stop distance

the stop distance is how far price can move against the position, in %, before the idea is wrong. pick the stop first, then the size. a wider stop means a smaller position, and the loss stays the same either way.

hypothetical example

account: $10,000
risk: 1%, so $100
stop: 5% below entry

the position would be $100 ÷ 0.05 = $2,000. if the stop is hit, the loss is 5% of $2,000, which is $100.

with a 10% stop, the position would be $1,000. with a 2% stop, it would be $5,000. the loss when wrong stays at $100.

now ten losses in a row, each a fixed % of the current account:

1% each: 0.99¹⁰ ≈ 0.904. that’s about −9.6%, and it takes about +10.6% to get back.
10% each: 0.90¹⁰ ≈ 0.349. that’s about −65%, and it takes about +187% to get back.

losses and gains aren’t symmetrical. a 50% loss needs a 100% gain just to break even.

where the math leaks

fees come out of every entry and exit, so they belong in the risk amount.
stops aren’t promises. fast markets, gaps and thin order books can make the real loss bigger than planned.
correlated positions behave like one big bet when the whole market drops.
leverage changes the margin posted. it only leaves this math unchanged while the stop sits well inside the liquidation level. mostly, it makes oversizing effortless.

the same “decide the downside first” habit applies before buying anything at all. see how to spot a rug pull before it rugs you.

nerd corner

the convention. trading-education sources describe a fixed percentage risked per trade, with rules of thumb up to about 2% (investopedia, position sizing). this site uses 0.5–1% as its convention. neither is a recommendation.

stop-market vs stop-limit. a stop-market order exits, but can fill worse than the stop level (slippage). a stop-limit order controls the price, but may not fill at all if price jumps past it, which leaves the position open (investopedia, stop-limit order, wikipedia, order types).

liquidation can come before the stop. mark price comes from an index of several exchanges plus a funding basis. last price is the latest trade on one exchange. many exchanges use last price as the default stop trigger and mark price for liquidation, and some let the trigger be changed to mark or index. a mark-price trigger is more likely to fire before liquidation, but can still slip. exchange docs, cited as sources, not recommendations: bybit faq, bybit mark price, bybit api, slTriggerBy, kraken. funding payments and fees drain margin and pull the liquidation price closer, and a gap can skip both.

liquidation distance, roughly. about 1 ÷ leverage away from entry, minus the maintenance margin rate, before fees and funding. hypothetical: 10x with 0.5% maintenance ≈ 9.5% away, so a 5% stop fits. at 25x (≈ 3.5%) it doesn’t.

isolated vs cross margin. in isolated margin, only that position’s margin is at risk. in cross margin, the whole balance backs it.

none of this picks trades. it just keeps ten bad ones from ending the game.

not financial advice. hypothetical numbers; real losses are not hypothetical. interests: see /disclosure.