Position Sizing: How Much Should You Risk Per Trade?

By Sam Davila on 2026-07-10 - 2 min read

The most common professional guideline is risking 1% to 2% of your account per trade, where "risk" means the amount you lose if your stop is hit, not the size of the position. Position sizing is the one decision that determines whether a losing streak is survivable, which makes it more important than entry timing for most traders.

Risk is stop distance, not position size

The calculation that many newer traders skip: decide where your stop goes first, then size the position so that hitting the stop loses your chosen risk amount.

• Account: 25,000. Risk per trade at 1%: 250.
• Entry 50, stop 47.50 means 2.50 of risk per share.
• 250 divided by 2.50 = 100 shares, a 5,000 position.

Note what happened: a 5,000 position "risks" only 250, because the stop defines the loss. A tighter stop allows a larger position for the same risk; a wider stop forces a smaller one. Size is an output of the stop, never the starting point.

Why 1-2% is the standard

Losing streaks are a statistical certainty, not a possibility. At 1% risk per trade, ten straight losses (which happens to good strategies) draws you down about 10%, fully recoverable. At 10% risk per trade, the same streak destroys two-thirds of the account, and a 65% drawdown needs a 186% gain just to get back to even. Small per-trade risk is not caution; it is what keeps the math survivable long enough for an edge to play out.

Adjustments that make sense

• Correlated positions share a budget: three tech longs are closer to one big trade than three independent ones. Cap total correlated risk, not just per-trade risk.
• Reduce size after losses: halving risk after two consecutive losses caps streak damage exactly when judgment is most impaired.
• New strategies start at half risk until they have a track record in your hands, not someone else's backtest.
• Volatile assets get wider stops and therefore smaller positions, automatically, if you follow the formula.

The multi-account blind spot

Percent-of-account rules assume you know your real account size and your real exposure. With positions spread across three brokers, most traders unknowingly double up: the same ticker or sector held in multiple accounts is one large bet wearing three disguises. An aggregated view restores the true denominator. Sentient Logic shows your combined exposure across every connected broker, which is the prerequisite for any sizing rule to mean what you think it means.

Educational content, not financial advice. Trading involves risk of loss. Examples are illustrative only.