Position Sizing
Deciding how large a trade to place based on your risk.
What is Position Sizing?
Position sizing is the process of determining how many shares, lots, or contracts to trade so that a losing trade only costs a controlled portion of your account. It is typically based on the account size, the percentage of capital risked per trade, and the distance to the stop-loss. Proper position sizing is central to risk management because it caps losses regardless of whether any single trade wins or loses.