Understanding Position Sizing: It's Not About Your Account Size

Too many new traders equate position sizing with how much they can buy with their account. That's a surefire way to blow up. Proper position sizing is about managing your risk per trade, not maximizing your potential profit on any single move. Say you're risking 1% of your account per trade. If your stop loss is $100 away from your entry, you determine how many shares you can buy so that if that stop hits, you lose exactly 1% of your capital. It means smaller positions on volatile assets or wider stops. Get this wrong, and nothing else matters.