Position size
Size is calculated from the distance to the stop-loss, not the other way round. Stop first, size second.
Position size — what it is?
Position size is not a preference but the result of a calculation. It is chosen so that a triggered stop-loss costs exactly the set percentage of the account.
An important consequence: a wide stop is neither forbidden nor worse than a tight one. It simply calls for a smaller size.
The order of operations is the reverse of the usual one. First the markup and the stop-loss, then the size calculation — not picking a size and fitting the stop to it.
- 1. Account — 100 000 ₸
- 2. Risk — 1% = 1 000 ₸ — what you are willing to lose
- 3. Stop-loss — chosen from the chart: 50 points to the place where the idea breaks
- 4. Point value — the platform computes it for the specific instrument
- 5. Size — 1 000 ₸ ÷ 50 points = the value of one point, and the size follows from it
- Order — Stop-loss from the chart first, size second. Never the reverse
Position size — how it is built?
Size = (account × risk percentage) ÷ (distance to stop-loss × point value). It has to be calculated before every trade: the distance to the stop changes, so the size changes with it.
Position size — common mistakes
Keeping the same size with different stop distances.
Shortening the stop-loss for the sake of a bigger size.
Forgetting that point value differs across instruments.
Rounding size up "to make it neater" — that quietly pushes risk above plan.
Related to
Glossary
- stop-loss
- an exit level set in advance for a losing trade.
- instrument
- the specific thing being traded: EUR/USD, XAU/USD, BTC/USDT.
- point
- the minimum step of a quote, usually ten times smaller than a pip.