GlossaryIntermediate
Position Sizing
Deciding how much capital to risk on a single trade, relative to total available capital.
Position sizing is the decision of how much capital to commit to a single trade, generally expressed as a percentage of total available trading capital rather than a fixed dollar amount, so that risk scales consistently as capital grows or shrinks.
It's one of the most direct, controllable levers in managing a trading strategy's overall risk — see Kaavon's "Understanding Position Sizing" guide for common approaches and how position sizing interacts with risk of ruin.
Examples
- A trader risking a consistent 1% of capital per trade is using a fixed-percentage position-sizing approach.
- Position sizing determines how much a single losing trade actually costs, independent of how often the strategy wins or loses overall.