Position sizing
Two traders take the exact same trades all season. One finishes on the leaderboard podium; the other gets liquidated in week three. The difference is not the trades — it is the sizing. Sizing is the one decision entirely within your control on every single trade.
Decide the loss first, derive the size
Beginners pick a size that "feels right", then discover the risk. Professionals invert it:
- Choose your risk budget per trade — commonly 1% of equity (2% is aggressive).
- Find the stop distance — where the idea is invalidated (a level, or 1.5×ATR).
- Size = risk budget ÷ stop distance. Done.
Notice what happened: a tight, well-defined stop allowed a decent position while risking only 1%. A vague, distant stop would force a smaller position for the same risk. The stop sizes the trade — never the other way round.
Why 1%? The survival arithmetic
- Ten straight losses at 1% each → down ~9.6%. Annoying; fully recoverable.
- Ten straight losses at 10% each → down ~65%. You now need +186% to break even.
Losing streaks are not a possibility — over 90 days they are a certainty. The 1% rule exists so that a normal streak is a bruise, not an obituary.
Max leverage is not max size
The 10x cap defines what the platform permits, not what is wise. Your true dial is effective leverage (gross notional ÷ equity — see Leverage & margin). Sized from risk as above, most sensible trades land at 0.5–3x effective. If risk-based sizing keeps producing 8–10x, your stops are too tight for the market's volatility — re-read ATR.
Fixed fractional risk (1%), stop set by the market, size derived — this single habit outperforms any indicator in this guide. It is called the only free lunch because it costs nothing and pays every day.