BeginnerLesson 1 of 4 · 7 min
Position Sizing Basics
Size each trade from the amount you are prepared to lose, not the other way round.
Illustrative chart · Entry, stop and distance
The simple formula
Position size = amount risked ÷ distance to stop. If you decide to risk a fixed small portion of your account and the stop is wider, the position must be smaller.
This keeps the loss on any single trade roughly constant, whatever the chart looks like.
Key takeaways
- Decide the risk amount first.
- Wider stop → smaller position.
- Consistency beats conviction.
Charts are illustrative examples, not real market data. This content is for educational purposes only and is not financial advice.