Position Sizing

Position sizing is the process of deciding how large a trade to take relative to your account size and the risk you're willing to accept, usually expressed as a percentage of account equity risked per trade (commonly 1–2%). It accounts for your stop-loss distance and the pip value of the instrument to calculate the exact lot size that keeps a single loss within your risk tolerance. Consistent position sizing is widely considered more important to long-term trading survival than any single entry or exit decision.