Position sizing

Position sizing is the part of trading you fully control. You can't decide whether a trade wins, but you decide how much it costs if it doesn't. In fixed-payout trading the stake is the whole risk, so sizing simply means choosing the stake.

The most common method is fixed-fraction sizing: risk the same small percentage of your current balance on every trade, often 1–2%. With a $500 balance and 2%, the stake is $10. When the balance falls, the stake falls with it, which slows losses during a bad run; when it grows, stakes grow gradually.

Why so small? Losing streaks are normal even for a method with a real edge. At a 55% win rate, a run of 8 losses in a row will turn up sooner or later over a long series of trades. At 2% per trade that run costs roughly 15% of the balance; at 20% per trade it ends the account.

Mistakes to avoid: sizing up after losses (the martingale), sizing up after wins out of overconfidence, and sizing by feel. The risk calculator shows the effect of different sizes, and risk per trade explains the reasoning in detail.