Position Sizing: The 1% Rule
Calculate exactly how big a position should be so a losing trade costs a fixed slice of your account.
Most traders pick a size by feel, or by how much leverage they want to use. Professionals work backwards from how much they are willing to lose if the trade is wrong.
The 1% rule
Risk a small, fixed fraction of your account on each trade — commonly 0.5% to 2%. At 1%, ten losses in a row (which will happen eventually) cost about 10% of your account, not all of it.
Position size = (account × risk %) ÷ (entry − stop)- Account × risk %:
- The dollars you accept losing, e.g. $10,000 × 1% = $100
- Entry − stop:
- Distance to your stop-loss per unit, e.g. $60,000 − $58,800 = $1,200
| Account | $10,000 |
|---|---|
| Risk per trade | 1% = $100 |
| Entry / stop | $60,000 / $58,800 (2% away) |
| Size | $100 ÷ $1,200 = 0.0833 BTC |
| Position value | 0.0833 × $60,000 = $5,000 (0.5x effective leverage) |
If the stop is hit you lose $100 — 1% — no matter what leverage the slider is set to.
Where leverage fits
Leverage comes last. Once the size is fixed by your risk, leverage only decides how much margin it ties up. Choose a leverage where the liquidation price sits comfortably beyond your stop — never one where liquidation is your stop.
Wider stop, smaller size
If the chart says your idea is only wrong 5% away, use a 5% stop and a smaller position. Tightening the stop to fit a bigger position just gets you stopped out by normal noise.
Key takeaways
- Decide the dollar loss first (e.g. 1% of the account), then the size.
- Size = risk dollars ÷ distance from entry to stop.
- Leverage only changes the margin used; liquidation must sit beyond your stop.