Understanding Position Sizing in CFD Trading

One of the most critical aspects of managing risk in CFD trading, or any trading really, is proper position sizing. It's not about how much you can buy, but how much you should buy relative to your total trading capital and the risk you're willing to take on a single trade. A common mistake is using a fixed lot size, irrespective of the stop-loss distance or the volatility of the asset.

Instead, you should calculate your position size based on a fixed percentage of your capital you're willing to risk per trade (e.g., 1-2%). If you're risking 1% of a $10,000 account, that's $100. If your stop-loss for a $UNI trade is at $3.10 and the current price is $3.20, your risk per share is $0.10. To risk only $100, you'd buy 1000 shares ($100 / $0.10). This approach ensures that no single trade, even a losing one, will disproportionately impact your overall account.