Position Sizing

Position sizing is deciding how much capital to commit to a single trade or investment, so that no individual loss can seriously damage your account. Many traders consider it the most important risk-management decision — more important than entries or exits — because it determines whether mistakes are survivable.

A common approach is the fixed-fractional rule: risk no more than a small percentage of the account, often 1-2%, on any one trade. For example, with a $10,000 account and a 1% risk limit, you can lose at most $100 per trade. If you plan to buy ETH at $3,000 with a stop-loss at $2,850 (a $150 risk per coin), your maximum position is $100 / $150 ≈ 0.67 ETH — the stop distance, not gut feeling, sets the size.

Proper sizing keeps a losing streak from being fatal: ten consecutive 1% losses leave you down about 10%, fully able to continue, whereas ten 10% losses destroy most of the account. In crypto's volatility, oversizing is the most common way otherwise-sound traders blow up. A common misconception is that a high-conviction idea justifies an outsized position; conviction is not information the market respects, and sizing rules exist precisely for the trades you feel surest about.