How to size your position: a worked example

Most beginners decide how much to buy by feel: "I'll put in $2,000, that seems reasonable." Professionals do it backwards — they decide how much they're willing to lose first, and let that number tell them how much to buy. That flip is the single most important habit you can build before touching real money, and it takes one formula.

Step 1: Decide your risk per trade

The classic rule is risk 1–2% of your account per trade. Not "invest 1–2%" — risk 1–2%, meaning that if the trade goes wrong and hits your stop-loss, you lose only that much. With a $100,000 account and 1% risk, a losing trade costs you $1,000. You could be wrong ten times in a row and still have 90% of your account. At 10% risk per trade, five bad trades cut your account nearly in half — that's the difference between a drawdown and a disaster.

Step 2: Set your stop-loss before anything else

A stop-loss is the price at which you admit the idea was wrong and exit. It should sit at a level that invalidates your reason for entering — below a support level, for example — not just an arbitrary round number. For this example: you want to buy Bitcoin at $50,000, and you decide the idea is wrong if it falls 5%, so your stop is $47,500.

Step 3: The formula

Plugging in the example numbers:

• Max loss = $100,000 × 1% = $1,000
• Position size = $1,000 ÷ 5% = $20,000
• Units = $20,000 ÷ $50,000 = 0.4 BTC

Read that middle line again, because it surprises people: with a 5% stop, a 1% account risk means a $20,000 position — not $1,000. The $1,000 is what you lose if the stop triggers. A tighter stop allows a bigger position for the same risk; a wider stop forces a smaller one. The formula keeps your loss constant while the market's volatility decides your size.

Why this matters more than entries

Two traders can take the exact same trades and end up in completely different places purely because of sizing. The one risking 1% per trade survives the inevitable losing streak; the one risking 10% doesn't get to be around when the winning streak arrives. You cannot control whether the next trade wins. You can always control how much it costs you if it loses.

Common mistakes

• Sizing first, stop second. If you pick the position size before the stop, the formula runs backwards and your risk becomes whatever the market decides.
• Moving the stop. A stop you move when price approaches it isn't a stop — it's a hope. Your max loss is only real if you honor it.
• Ignoring fees. A 0.1% fee each way is small per trade but real over dozens of trades — our simulator charges it precisely so you build the habit of counting it.

Everything above is educational. It teaches a sizing method, not what to buy — nothing on TSBCrypto is financial advice, and all trading here is simulated.