The standard method works backwards from risk. Choose the amount you are willing to lose, for example 1% of the account, measure the distance from entry to stop loss and divide the first by the second. The result is the quantity to buy or sell. Leverage then only decides how much margin the position ties up.
Example
Account $8,000, risk 1% = $80. ETH entry at $3,200 and stop at $3,120 make a stop distance of $80 per ETH, so the position size is $80 ÷ $80 = 1 ETH, a $3,200 position. With the stop at $3,160 instead, the distance is $40 and the size 2 ETH. Either way, a stop-out costs $80.
Why it matters
Position sizing turns a stop loss into a known, limited loss. It keeps every trade at a similar risk, so your results reflect your decisions rather than random size choices, and it is the main lever you have on drawdowns and risk of ruin.
Common mistake
Using the same quantity on every trade regardless of stop distance. A tight stop and a wide stop then carry very different risks, and the largest losses tend to come from wide-stop trades you never meant to size up.
Put it into practice
FAQ
- What percentage should I risk per trade?
- Many traders use 0.5% to 2%. Lower risk means smaller drawdowns and a better chance of surviving losing streaks; prop firm traders often use 0.25–1%.
- Should fees be included in position size?
- With tight stops, yes. Add the expected entry and exit fees to the stop distance so that a stop-out costs what you planned.
- How does leverage affect position size?
- It does not. Size comes from your risk and the stop distance. Leverage only changes the margin required and the liquidation price.