The formula in one line
Position size isn't something you pick. It's something you derive from three inputs you've already decided on.
That's the whole calculation. Three numbers in, position size out. If any of the three is wrong, the output is wrong — and no amount of screen time or "feel" fixes it.
The reason this matters is that two of those three numbers should be decided before you look at a chart. The third — stop distance — is the only one that depends on the trade itself.
The three numbers, defined
1. Account size
The number you're risking against. Not the amount in your bank account, not the amount you wish was in your trading account — the actual balance you're trading with right now.
This number changes as your account grows or shrinks, and that's fine. What matters is that you use the real number every time, not the number from three months ago when things were going well.
2. Risk per trade (%)
This is the single biggest lever you control. Most retail traders land somewhere between 0.5% and 2%. Some prop firms cap it lower. Some traders run 0.25% on a fresh challenge and scale up after a clean month.
The number itself matters less than the discipline of keeping it fixed. A trader who risks 1% on every trade with total consistency will survive a losing streak that wipes out a trader who "usually" risks 1% but sizes up on conviction.
3. Stop distance
How far the stop sits from your entry. This is the only one of the three that comes from the chart, and it comes from your setup, not your desire.
A setup with a tight invalidation level gets a tighter stop. A setup that needs room to breathe gets a wider one. The stop distance is a property of the trade, not a choice you make to fit a position size you already wanted.
This is the number traders fudge most often — usually by widening it slightly so the math works out to a size they feel comfortable with. That's backwards. If the math says the trade is too big, the trade is too big.
A worked example
Let's take a realistic scenario: a $25,000 account, 1% risk per trade, and a stock entry at $100 with a stop at $98.
Now the same account and risk %, but a tighter setup with a $1 stop:
And with a wider stop of $4:
Same account. Same risk. Three different sizes — because the trade is different each time. The risk is always $250, and that's the point.
The mistake most traders make
The most common sizing mistake isn't a math error. It's the sequence.
Most traders pick a position size first — often something like "I'll buy 200 shares" or "I'll put $10k in" — and then place a stop wherever it looks reasonable on the chart. The risk per trade ends up being whatever falls out of those two decisions, and it drifts wildly from trade to trade.
The correct sequence is the opposite:
- Decide the setup and the stop level first — the chart gives you the invalidation.
- Measure the stop distance from entry to that level.
- Let the formula derive the position size.
- Place the order at that size, no adjustments.
When the sequence is right, risk per trade stays constant, drawdown stays predictable, and a bad week doesn't turn into a bad month. When it's wrong, the numbers on the dashboard start telling a story you didn't plan.
Futures and point value
If you trade futures, the formula is the same — you just multiply the stop distance by the contract's point value first.
Take an ES trade with a 4-point stop on a $25,000 account at 1% risk. ES is $50 per point, so the stop distance in dollars is 4 × $50 = $200 per contract.
Two contracts would risk $400, which is 1.6% of the account — outside the rule. So the answer is one contract, not two, even if two "feels better" or "the setup is really good." The rule exists precisely because that feeling shows up on the trades that matter most.
Where this lives in Edge Console
The whole calculation runs automatically once your numbers are set.
Rules & Risk stores your account size, risk per trade, daily loss limit, max trades per day, and point value. Every other module reads from those settings.
Log Trade takes your entry, stop and exit and calculates position size, realized P&L and R-multiple for you. You don't have to touch a calculator, and you can't accidentally size up — the risk is fixed the moment you set it.
The daily loss lock is the enforcement layer. When you hit your max daily loss or max trades, the trade form locks and shows you the damage. No override, no exception. That's the whole point — the rule exists for the moment you'd want to break it.
Once those three numbers are set, position sizing stops being a decision. It becomes a property of the trade, and your attention can go where it actually matters: the setup, the exit, and whether you followed your own process.