Position Sizing
Risk
Position sizing is the process of determining how many contracts or shares to trade based on account size, stop distance, and risk per trade.
Position sizing is the process of choosing how many contracts, lots, or shares to trade based on account size, stop-loss distance, and risk-per-trade tolerance.
In prop trading, position sizing should always be governed by the drawdown rule set first and the strategy''s edge second. A trader on a $100k account with a 5% daily loss limit and a 1% per-trade risk budget can take five trades before the daily limit binds — sizing the first trade larger compresses the day''s flexibility.
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