How position sizing works
Position sizing is deciding how much to trade so that a loss at your stop costs only a small, fixed slice of your account, usually 1 to 2 percent. You start from the risk you will accept, set your stop, and then solve for the size that makes the distance to that stop equal your chosen risk. It is the single most important discipline in trading, ahead of entries and analysis.
Worked example
Your account is $10,000 and you risk 1 percent, so $100 per trade. Your stop is 50 pips away. On a mini lot worth about $1 per pip, a 50-pip loss is $50, so you can trade two mini lots to risk $100. Move the stop to 100 pips and you halve the size to one mini lot, keeping the dollar risk identical. The size flexes; the risk stays fixed.
Position sizing on Volity
Because Volity supports micro and mini lots, even a $50 Markets account can size correctly and keep risk at 1 to 2 percent per trade. Negative balance protection caps the absolute worst case at your deposit, but it is position sizing that keeps you in the game long enough for an edge to play out. Decide risk first, then size; never the reverse.
Why it matters
Position sizing is what separates traders who survive from those who blow up, because most account deaths come from one oversized trade, not a bad strategy. Fix your risk per trade and never exceed it. Related: risk-reward ratio and drawdown.
Learn more in our forex trading guide.
