What position sizing means
Position sizing is the process of deciding how much of your account — in money or in risk — you’ll put on a single trade. It affects your account’s survival far more than direction or timing ever does.
Why it outweighs entry timing
Even a perfectly timed entry can’t save an account if you habitually risk 50% of it per trade — a handful of losses becomes unrecoverable. Conversely, even a clumsy entry rarely wrecks an account if the risk per trade stays small; one mistake just doesn’t move the needle much.
A basic sizing formula
- Account balance × risk tolerance % = maximum dollar loss you’ll accept on this trade
- Max loss ÷ (entry price − stop price) = appropriate size (or leverage adjustment)
- Remember that higher leverage shrinks your room before liquidation, even at the same dollar risk
Verify it with your log
When you log leverage alongside results, the performance gap between high-risk days and low-risk days becomes visible. You’ll likely find, in the data, that most account blowups come from broken sizing — not a broken strategy.
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