Position size refers to the volume of a single trade or allocation within a portfolio.
In trading, it is typically measured in lots, units, or as a percentage of account equity. Position sizing is a core element of risk management, ensuring that no single loss can disproportionately damage the account.
Professional traders often limit risk per trade to a fixed percentage of account equity—commonly one to two percent.
Position size calculation takes into account stop-loss distance, pip value, and account size. An excessively large position size can quickly lead to significant losses or a margin call, while a too small position size may limit return potential.
Correct position sizing is one of the most important skills in active trading.
