Position Sizing Without the Spreadsheet
You don't need a complicated risk model to stop blowing up. Here's the one piece of mental math that decides how much to put on each trade.
Most account blow-ups don't come from bad entries. They come from good entries sized far too large. You can be right about direction and still lose everything if a single trade is allowed to do real damage. Position sizing is the dial that controls that — and you don't need a spreadsheet to set it.
Start from what you can lose, not what you hope to make
The simplest durable rule is to risk the same small percentage of your account on every trade — commonly one to two percent. "Risk" here means the amount you lose if price hits your stop, not the size of the position. On a $10,000 account risking 1%, a losing trade costs you $100, whether the position itself is $500 or $5,000.
Fixing the loss first is what keeps a cold streak survivable. Ten losses in a row at 1% leaves you down about 10%, bruised but functional. The same ten losses at 10% risk each leaves you down roughly two-thirds of your account — a hole most traders never climb out of. Sizing is not about any single trade — it's about still being in the game after a run of bad ones.
The one line of mental math
Once you've fixed the dollar risk, the position size falls out of where your stop is:
Position size = dollar risk ÷ distance from entry to stop
Say you'll risk $100 and your stop sits 4% below your entry. Then $100 ÷ 0.04 = $2,500 — that's the position. Move the stop closer (a 2% stop) and the same $100 of risk lets you hold a $5,000 position. Move it wider (an 8% stop) and the position shrinks to $1,250. The wider your stop, the smaller your size, automatically. The risk stays flat.
Why a percentage beats a fixed dollar amount
Risking a percentage rather than a flat dollar figure makes your sizing self-correcting:
- When the account grows, your position sizes grow with it — you compound without re-deciding anything.
- When the account shrinks, sizes shrink too — you de-risk in a drawdown instead of doubling down.
- Leverage doesn't change the math — your risk is the distance to the stop times the size, and leverage only changes the margin you post. The one caveat: at high leverage a liquidation can close you out before your stop does, so keep leverage low enough that your stop, not the exchange, ends the trade.
The point isn't precision
You will not size every trade perfectly, and you don't need to. The goal is a rule that's simple enough to run in your head before every entry, so the question is never "how much do I feel like putting on?" but "where's my stop, and what does that make the size?" Answer those two and the position sizes itself — no spreadsheet required.