Position size on $1,000.

This guide uses 1% of a $1,000 account ($10) as a worked-example assumption, not a universally safe limit. A 2% assumption would be $20. Your circumstances, costs and ability to absorb losses matter; neither percentage guarantees protection.

Here's the core formula every trader needs to memorize: Position Size = (Account Size × Risk %) ÷ Stop-Loss %. For example, if you have a $1,000 account, risk 1%, and set a 5% stop-loss on a trade, your position size should be: ($1,000 × 1%) ÷ 5% = $200. You're only deploying $200 of capital, so if the trade hits your stop-loss and it fills at that price, you lose about $10 — fees and any slippage come on top.

Five consecutive losses of 20% of remaining equity leave about $328 from $1,000; five at 1% leave about $951. These are arithmetic scenarios before costs, not predictions of how often losses occur or a recommendation of either percentage.

Here's the formula professional traders use:

Let's break this down with a concrete example:

Your stop-loss placement directly determines your position size, so it should never be chosen randomly. A well-placed stop-loss sits just below a key support level (for long trades) or above a key resistance level (for short trades). Tight stops without technical justification will get triggered by normal market noise — and then you'll re-enter at a worse price, compounding your losses.

Illustrative calculations for a $1,000 account and a $10 planned stop loss (1%). Position notional follows from the stop distance. The margin column uses 3× leverage as an example, not a recommendation.

Each row assumes a $10 stop loss before costs and an execution exactly at the stop. Gaps, slippage, fees or liquidation can produce a different loss.

For a $10 planned loss and a 2% stop, the position is $500 at any leverage (10 ÷ 2% = 500). At 1× you post the full $500 as margin; at 5× you post $100; at 10× only $50. These are simplified initial-margin examples. Actual liquidation depends on maintenance margin, mark price, fees and the contract; a stop is not a guaranteed exit.

A 1:2 ratio (risk 1, reward 2) is an example payoff, not a rule that ensures profit. If all targets and stops fill as assumed, 40 winners × $20 − 60 losers × $10 = +$200 per 100 trades before costs. This arithmetic does not predict the win rate or achievable fills.

Increasing size to recover a loss increases exposure. Under the illustrative 1% current-equity assumption, a $10 loss leaves a $9.90 planned loss on a $990 account for the next calculation, before costs. Overleveraging Guide The same calculation gives $15 at 1% of a $1,500 balance. Changing the balance changes the model's size; it does not establish that the account will grow.

Add the planned losses across open positions. Ten positions at $10 each imply $100 in planned losses before costs, not a guaranteed maximum. Correlated moves, gaps and margin rules can increase losses; no universal number of trades removes that risk.

Here's a quick real-world example tying it all together: You spot a potential long trade on Bitcoin (BTC). Your account is $1,000. You identify support at $60,000 and place your stop-loss at $59,400 — that's a 1% stop-loss distance. Using the formula: ($1,000 × 1%) ÷ 1% = $1,000 position size. You buy $1,000 worth of BTC spot, no leverage. If BTC drops to $59,400 and your stop fills there, you exit with a $10 loss plus fees; in a fast market the fill can be a little worse. Small, planned, and repeatable.

Position sizing describes exposure under stated assumptions. Stop execution, fees, slippage, liquidation and added collateral can change the result. A sizing formula cannot guarantee protection or profitability.