Risk a fixed fraction, not a fixed quantity
The simplest robust method is fixed-fractional sizing: risk the same small percentage of your account on every trade — commonly 0.5% to 2%. As your account grows or shrinks, your position size scales with it automatically.
This does two things: it caps the damage of any single trade, and it removes the emotional temptation to bet big after a loss to 'win it back'.
Sizing from your stop-loss
Work backwards from risk, not forwards from conviction. The formula is: position size = (account × risk %) ÷ (distance to stop-loss).
Example: a ₹1,00,000 account risking 1% (₹1,000) on a trade with a 5% stop can take a ₹20,000 position — because a 5% move on ₹20,000 is the ₹1,000 you're willing to lose. A tighter 2% stop allows a larger ₹50,000 position for the same risk.
Notice leverage never entered the calculation. Leverage only determines how much margin that position needs — it should never determine the position size.
Common sizing mistakes
- Sizing from leverage: opening the biggest position the exchange allows, then hoping the stop holds.
- Inconsistent risk: betting 5% on a 'sure thing' and 0.5% on the rest — one bad 'sure thing' erases many good trades.
- Ignoring correlation: five 1% positions in coins that all move together is really one 5% position.
- Forgetting fees and funding, which quietly increase the real cost of every position.