b9_1155what is position sizing?
deciding how big a trade is, based on how much you are willing to lose if it's wrong.
a common formula is position size = risk amount ÷ stop distance. hypothetical: $100 at risk with a 5% stop gives a $2,000 position.
related words
- risk amount the money you are willing to lose on one trade if the stop fills as planned (account × risk %).
- stop-loss (stop) a planned exit price where a losing trade is closed.
- stop distance the distance, in %, from the entry price to the stop.
part of the topic risk: free articles, more words and the guide.
checked . education, not advice. found a mistake? see corrections.