Position sizing
Position sizing is deciding how much money to put into a single trade, usually based on how much you're willing to lose if it goes wrong.
If you'd risk $100 on a trade with a stop 10% below your entry, the position would be $1,000.
Formula
Position size = amount at risk ÷ distance to stop (as a fraction)
Related terms
- Risk management: Risk management in trading is limiting how much you can lose, through position sizing, stop-losses, diversification and avoiding too much leverage.
- Stop-loss order: A stop-loss order sells automatically once a stock falls to a set price, to cap how much you can lose.
Guides
Practise with $10,000 in play money
Free. No real money involved.
For learning only. This isn't financial advice.