position sizing is the difference between a bad trade costing you 1% and costing you 30%. Most traders focus on entry signals while ignoring the math that actually determines their survival.
This guide provides calculators and formulas for sizing positions properly.
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.
