Position sizing is where a thesis becomes dollars at risk. Many blown accounts are not “wrong direction” stories—they are “right idea, wrong units” stories. A desk-style habit is to fix risk per idea first, then solve for size from stop distance or scenario loss.
Start with a risk budget per trade—often expressed as a small fraction of equity you are willing to lose if the stop or scenario limit is hit. That number should be boring on purpose. Excitement belongs in research notes, not in the denominator of your account.
Translate the budget into units. If your stop is 50 pips away and your pip value per lot is known, size is arithmetic—not intuition. The same logic applies to crypto perps with liquidation distance, or equities with a percentage stop. If you cannot write the loss at the stop, you are not sized—you are guessing.
Account heat is the layer above single trades: aggregate open risk across positions that might move together. A “1% per trade” rule fails when five trades are all short USD in different wrappers. FX books watch currency buckets; crypto books watch beta to BTC, funding drag on perps, and exchange concentration.
Leverage changes how much notional you control for a given margin deposit. It does not change whether your edge is positive. Negative expectancy with higher leverage is a faster path to zero, not a workaround for weak process.
Correlation is not a footnote. Two positions can each pass a per-trade risk check while doubling exposure to the same shock—oil, rates, or a weekend gap. Heat limits and scenario tables (“if X moves 2%, what happens to the book?”) are dull and useful.
Sizing also interacts with psychology. Oversized positions invite early exits on noise and late exits on hope. Undersized positions can breed overtrading to “feel” productive. Match size to the horizon and liquidity of the idea, not to yesterday’s P&L.
Work examples with hypothetical numbers. Read your broker’s margin, minimum size, and liquidation rules. VegaDeck quotes and calendars are context for volatility and event risk—not sizing instructions.
Educational only—not investment advice or personalised portfolio guidance.
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Educational only · not investment advice · Risk disclosures