If analysis is how you find trades, position sizing is how you survive them. It is, bluntly, more important than your entries: a brilliant strategy with reckless sizing blows up, while a mediocre strategy with disciplined sizing endures. The core rule is fixed-fractional risk — risk the same small percentage of your account on every trade.
How it works
Pick a risk-per-trade — commonly 1% of your account (2% is aggressive; professionals often use less). On every trade you size the position so that hitting your stop loses exactly that 1%, no more. Because the dollar risk is constant, a string of losses costs you a predictable, survivable amount, and no single trade can do serious damage.
The link to your stop
Position size is not chosen first — it falls out of your stop. Size = (account × risk%) ÷ (distance to stop). A wide stop (volatile setup) yields a smaller position; a tight stop yields a larger one. This is the volatility-based sizing from the last module, now as a complete rule: define invalidation, set risk%, and let the math give you the size. Never the other way around — never pick a size and then hunt for a stop that 'feels' okay.
Why fixed-fractional wins
Risking a fixed fraction means you automatically bet less after losses (your account is smaller) and more after wins — a built-in defence against ruin and a quiet compounding of gains. The alternative, sizing by emotion or conviction, guarantees that your biggest position eventually lands on your worst trade. This single habit — small, constant, pre-defined risk — is what separates traders who are still here in a year from those who are not.