Position sizing
Position sizing is the share of capital committed to a trade, calibrated so that the loss if the stop is hit remains a controlled fraction of the account.
Position sizing answers the question many beginners ask last when it should come first: how much to commit to this trade? The most widespread approach reasons in risk, not in invested amount: you first decide the fraction of capital you accept to lose if the stop is hit (commonly cited between 1 and 2%) then derive the quantity: size = (capital × risk per trade) / distance between entry and stop loss.
Why it is the main lever of risk
For an identical strategy, position sizing makes the entire difference between a bearable drawdown and a fatal loss: risking 1% per trade means a streak of ten consecutive losses costs about 10% of the account; at 10% per trade, the same streak wipes out nearly two-thirds of it. Sizing is therefore calibrated on the backtest's worst-case scenario, not its best. In Screener.Trading, paper trading lets you apply a sizing rule concretely on every order and observe its effect on the simulated account's PnL, before any real-world implementation.
A position size is only valid with the stop used to compute it: widening the stop afterwards without reducing the size silently increases the trade's real risk.
Keep exploring
- FeaturePaper trading: learn in real conditions, without the riskPlace orders, manage positions and track your P&L on fully virtual accounts : real trading practice with zero real money at stake.
- FeatureThe backtesting tool built into your screenersBacktests built from your screeners: entries, exits, fees and full metrics to judge a strategy on numbers instead of gut feeling.
- GlossaryStop lossA stop loss is an automatic loss-taking exit level, set before entering a position, which caps each trade's risk at a predetermined amount.
- GlossaryMaximum drawdownThe maximum drawdown is the largest decline suffered by the equity curve from a peak to the subsequent trough, expressed as a percentage of capital.
- GlossaryRisk/reward ratioThe risk/reward ratio compares a trade's targeted gain with its accepted loss, and together with the win rate determines whether a strategy has positive expectancy.
- GlossaryPnL (profit and loss)PnL (profit and loss) is the financial result of a position or portfolio, split into realised PnL on closed positions and unrealised PnL on open ones.
- GuideBacktesting a trading strategy, step by stepBefore risking a cent, replay your strategy on historical data: backtest setup, reading the key metrics, and the traps of over-optimization.
- GuideThe complete beginner's guide to tradingEverything you need to understand before placing your first order: reading a chart, choosing your style, using the right indicators, managing risk, and practicing without risking a cent.