Position sizing
Position sizing is the calculation determining how large a trade should be, derived from account size, the percentage of capital risked, and the distance between entry and stop-loss.
The calculation runs in one direction: decide the percentage of the account you are willing to lose, measure the distance to your stop, and let those two determine the size. Size is an output, never an input.
Reversing that order is one of the most common and most expensive habits in retail trading. Choosing a size first and then placing the stop wherever it fits means risk per trade varies arbitrarily, which makes results impossible to interpret — you cannot tell whether a strategy failed or whether one oversized trade distorted everything.
Consistent sizing is what makes a track record readable. Without it, a profitable month and an unprofitable one may differ only in which trades happened to be large.
Related terms
Maintained by Jared Sinclair, Founder · Syrax Global FZCO · Definitions are educational, not financial advice.
Knowing the vocabulary is the easy part.
Every term here can be learned in an afternoon. Applying them consistently under pressure is the part that decides outcomes — and the part we measure.