Position Sizing in Trading: The Formula and Worked Examples
How to size a trading position by risk: the position-size formula, worked examples with stops and leverage, common mistakes, and sizing rules in tournaments.
Position sizing answers one question: how big should this trade be? It matters more than entry timing, because it decides how much a wrong trade costs — and whether one bad day can end your run.
The formula
Position size = (equity × risk per trade %) ÷ stop distance %
- Equity — what your account is worth now.
- Risk per trade — the share of equity you accept to lose if the stop is hit (often 0.5–1%).
- Stop distance — how far your stop is from entry, in percent.
Worked examples (equity 100,000)
| Risk per trade | Stop distance | Position size | Effective leverage |
|---|---|---|---|
| 1% (1,000) | 2% | 50,000 | 0.5× |
| 1% (1,000) | 0.5% | 200,000 | 2× |
| 0.5% (500) | 1% | 50,000 | 0.5× |
| 2% (2,000) | 1% | 200,000 | 2× |
Notice: a tighter stop allows a larger position for the same risk. Leverage is only what makes that size possible — it is the result of sizing, not the input. More in leverage in trading.
Adding fees
Fees are charged on the position size, so include them in the risk: on a 200,000 position, two taker fills at 0.05% cost 200 — a fifth of a 1,000 risk budget. Very tight stops with big size can be eaten by costs.
Common mistakes
- Sizing by conviction — "I'm sure about this one" is how large losses happen.
- Same size, different stops — a 5% stop and a 0.5% stop with the same size are ten times different in risk.
- Adding to losers without a new stop.
- Ignoring correlation — long BTC, ETH and SOL together is close to one big trade.
- Increasing size after losses to recover faster.
Sizing in a trading tournament
- Everyone starts with 100,000 Credits, so the formula works directly on the starting bankroll — then on your current equity.
- Leverage caps: 20× in Hourly, 4-Hour, Daily and Weekly; 10× in PnL Monthly, PnL Quarterly and the World Championship. You rarely need the cap.
- Liquidation ranks last — sizing that survives a bad move protects your place and your PWR points.
- Drawdown breaks ties — steady sizing keeps it shallow. See max drawdown explained.
FAQ
How much should I risk per trade? Many traders use 0.5–1% of equity; the right number is the one that keeps a losing streak survivable.
Should position size change during a tournament? It changes with equity if you keep the same risk %. Avoid raising the risk % to catch up.
Does position sizing matter in short formats? Even more — there is little time to recover from one oversized loss.
PnL World tournaments are simulated: trades are executed against live market data, but no real-money positions are opened on any exchange. Nothing here is financial advice.
Next: Risk-reward ratio · Stop-loss and take-profit · Leverage in trading