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Module 08 · Risk Management

8.2Position Sizing

What you will learn
  • ·The four inputs to position size
  • ·Why leverage is not an input to risk
  • ·How to size consistently
Core content

Position size should be based on:

  • ·Account equity
  • ·Risk per trade
  • ·Stop distance
  • ·Instrument specifications

Never determine position size simply because a broker offers high leverage.

TLHQ insight

Stop distance and risk determine size. Nothing else.

Example

With fixed risk, a wider logical stop produces a smaller position — not a bigger loss.

Examples use historical or illustrative data only. They are not live market signals.

Apply it

Compute position size for two setups with different stop distances at identical risk.

Knowledge check
Check 01 · choice

If stop distance doubles and risk stays fixed, position size should:

Check 02 · truefalse

Available leverage should determine position size.

Key takeaways
  • 01Size derives from equity, risk, stop distance and specification.
  • 02Wider stops mean smaller positions.
  • 03Leverage is not a sizing input.
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Educational content only. Nothing here is financial advice or a recommendation to trade. Trading involves risk of loss, results vary between individuals, and past performance does not indicate future results. Only capital you can afford to lose should be exposed to market risk.