Why Position Sizing Matters More than Win Rate
A trader with a 70% win rate can still blow up an account with improper sizing. If winning trades risk $50 but losing trades risk $500, a short losing streak wipes out months of steady progress. Systematic sizing fixes your risk on every trade.
The Sizing Formula:
Position Size = (Account Equity × Risk Percentage) ÷ (Entry Price − Stop Loss Price)
Step-by-Step Position Sizing Example
Suppose you have a $10,000 account and want to risk 1% ($100) on a Bitcoin setup. You enter long at $65,000 with a stop-loss at $64,200 (an $800 price distance):
- Account Risk: $10,000 × 0.01 = $100
- Price Distance to Stop: $800
- Position Size: $100 ÷ $800 = 0.125 BTC
If the stop hits, you lose exactly $100, no more, no less. Your sizing protects your portfolio regardless of volatility.