Position Sizing: The Math That Saves Accounts
Win rate doesn't matter if your size is wrong. The single calculation that separates traders who survive from traders who blow up.
Most blown accounts are not the result of bad analysis. They're the result of correct analysis applied at the wrong size. Position sizing is the maths that decides whether your edge ever gets to compound.
The one formula to memorise
Position size (units) = (Account × Risk %) ÷ (Stop distance × Pip value)
That's it. Three inputs: how much you have, how much of it you're willing to lose on this trade, and how far away your stop is. The formula gives you the only correct size — anything bigger is gambling, anything smaller is leaving edge on the table.
Worked example
You have a $10,000 account. You risk 1% per trade. You're trading EUR/USD with a 50-pip stop. Pip value on a standard lot is $10.
Position = (10,000 × 0.01) ÷ (50 × 10) = 100 ÷ 500 = 0.2 standard lots
0.2 lots is your correct size. Not 1 lot because that's what your broker's default is. Not 0.01 lots because you're scared. 0.2 lots — because that's what the maths says.
Why 1% is the right starting number
At 1% risk per trade, you can lose 20 trades in a row and still have 81.8% of your account. At 5% risk, the same losing streak leaves you with 35.8%. Recovery from a 65% drawdown requires a 185% return. From 18% drawdown, just 22%. The maths is unforgiving in one direction and forgiving in the other.
Use a calculator. Every time. Discipline isn't a feeling; it's a process you don't skip.