Every position size calculation needs three inputs:
- Account risk - How much of your account to risk per trade
- Trade risk - Distance from entry to stop loss
- Current conditions - Volatility, correlation, confidence
Formula:
Position Size = (Account × Risk Per Trade) / (Entry Price - Stop Loss)
The simplest approach. Risk a fixed percentage per trade.
Risk Amount = Account Balance × Risk Percentage
Position Size = Risk Amount / Stop Distance (in dollars)
- Account: $10,000
- Risk per trade: 1%
- Entry: $40,000 (BTC)
- Stop loss: $38,000
- Stop distance: $2,000
Risk Amount = $10,000 × 0.01 = $100
Position Size = $100 / $2,000 = 0.05 BTC
Position Value = 0.05 × $40,000 = $2,000 (20% of account)
Pros: - Simple to calculate
- Consistent risk per trade
- Works in any market condition
Cons: - Doesn't account for win rate
- Ignores position correlation
- No adjustment for conviction
| Trader Type |
Risk Per Trade |
| Conservative |
0.5% |
| Standard |
1.0% |
| Aggressive |
2.0% |
| Maximum |
3.0% |
Never risk more than 2% without exceptional circumstances.
Mathematically optimal sizing based on edge and win rate.
Kelly % = W - [(1-W) / R]
Where:
W = Win rate (decimal)
R = Win/Loss ratio (average win / average loss)
- Win rate: 55%
- Average win: $300
- Average loss: $200
- R ratio: 1.5
Kelly % = 0.55 - [(1-0.55) / 1.5]
Kelly % = 0.55 - [0.45 / 1.5]
Kelly % = 0.55 - 0.30
Kelly % = 0.25 or 25%
Full Kelly is too aggressive for most traders. Use half or quarter Kelly:
Practical Position = Kelly % × 0.5
25% Kelly = 12.5% practical position
Kelly assumes:
- You know your exact win rate
- You know your exact reward:risk
- Outcomes are independent
- You can withstand drawdowns
In crypto, these assumptions rarely hold. Use Kelly as a ceiling, not a target.
Size positions based on current market volatility.
Position Size = (Account × Risk%) / (ATR × Multiplier × Entry Price)
- Account: $10,000
- Risk: 1% ($100)
- BTC Entry: $40,000
- 14-day ATR: $1,500
- ATR Multiplier: 2 (stop at 2× ATR)
Stop Distance = $1,500 × 2 = $3,000
Position Size = $100 / $3,000 = 0.0333 BTC
Position Value = 0.0333 × $40,000 = $1,333
When volatility increases, positions automatically decrease:
| ATR |
Stop Distance |
Position Size |
Position Value |
| $1,000 |
$2,000 |
0.05 BTC |
$2,000 |
| $1,500 |
$3,000 |
0.033 BTC |
$1,333 |
| $2,000 |
$4,000 |
0.025 BTC |
$1,000 |
This protects you during volatile periods.
Track total portfolio heat (open risk) and size accordingly.
Portfolio Heat = Sum of (Position Size × Distance to Stop)
Maximum Heat = Account × Max Heat Percentage
Available Heat = Maximum Heat - Current Heat
Current positions:
- BTC Long: $2,000 position, 5% from stop = $100 at risk
- ETH Long: $1,500 position, 4% from stop = $60 at risk
Current Heat = $100 + $60 = $160
Max Heat (2%) = $10,000 × 0.02 = $200
Available Heat = $200 - $160 = $40
New position maximum risk: $40
This prevents overexposure even when individual positions are sized correctly.
| Column |
Content |
| A |
Account Balance |
| B |
Risk Per Trade % |
| C |
Entry Price |
| D |
Stop Loss Price |
| E |
Position Size (calculated) |
| F |
Position Value (calculated) |
| G |
Risk Amount (calculated) |
Risk Amount (G2): =A2*B2
Stop Distance: =ABS(C2-D2)
Position Size (E2): =G2/ABS(C2-D2)
Position Value (F2): =E2*C2
A1: Account Balance B1: 10000
A2: Risk % B2: 0.01
A3: Entry Price B3: 40000
A4: Stop Loss B4: 38000
A5: Stop Distance B5: =ABS(B3-B4)
A6: Risk Amount B6: =B1*B2
A7: Position Size B7: =B6/B5
A8: Position Value B8: =B7*B3
A9: Account % B9: =B8/B1
Correlated positions compound risk. Adjust sizing for correlation:
When BTC and ETH both long:
- Treat as partially single position
- Reduce combined size by 30-50%
Standard sizing would give:
- BTC: 2% position
- ETH: 2% position
- Total: 4%
With 0.8 correlation:
Adjusted Total = 4% × (1 + 0.8) / 2 = 3.6% effective exposure
Reduce each by: 3.6% / 4% = 90%
Adjusted positions: 1.8% each
Scale position size based on setup quality:
| Setup Quality |
Position Size Multiplier |
| A+ Setup |
1.5× standard |
| A Setup |
1.0× standard |
| B Setup |
0.75× standard |
| C Setup |
0.5× standard |
A+ Setup requires: - Multiple timeframe confirmation
- Volume confirmation
- Key level interaction
- Clean chart structure
- Low correlation to existing positions
"I'm really confident" isn't a position sizing input. Use the calculator regardless of feelings.
A 50% loss requires 100% gain to recover. Proper sizing keeps losses recoverable.
| Loss |
Required Gain to Recover |
| 10% |
11% |
| 20% |
25% |
| 30% |
43% |
| 50% |
100% |
| 75% |
300% |
Smaller accounts can take slightly higher risk (more important to grow).
Larger accounts should be more conservative (preservation matters).
Include realistic costs in stop distance:
Effective Stop = Stop Distance + (Entry × Fee% × 2) + Expected Slippage
Position Size (BTC) = Account × 0.01 / Stop Distance (USD)
Position Size = (Account × 0.01) / (ATR × 2)
Max Position = Account × 0.20 // Never more than 20% in single position
If calculated position > Max Position, use Max Position
What's the maximum I should risk per trade?
2% is the standard maximum. Going to 3% is aggressive and should be rare. Never exceed 5% per trade regardless of conviction.
Should I use the same position size for all trades?
No. Adjust based on stop distance, volatility, and setup quality. The risk amount stays constant, but position size varies.
How do I size positions for scaling in?
Allocate total position size across entries. If planning 3 entries, size each at 33% of calculated total.
Does position sizing work for leverage trades?
Yes, but calculate based on notional exposure. A 10× leveraged position of $1,000 has $10,000 exposure and should be sized accordingly.