Position Sizing
Position size decides how much a single trade can cost, and it’s the one number in a trading plan that shouldn’t be guessed at or picked out of habit. It’s an output of two other numbers, not a decision made on its own. The formula Position size = risk amount ÷ stop distance. Decide how much money the trade is allowed to lose, decide how far away the stop needs to sit based on the chart, and the size that connects the two is arithmetic, not a feel. ...