Risk & Position Sizing

Almost every beginner works in the same order. They find a trade they like, they decide to take it, and then, at the very last moment, they pick a lot size. Usually the same lot size they used last time, or a slightly bigger one because this setup looks particularly good.

That order is backwards, and it is the reason accounts blow up on a single trade.

Do it the other way round. Before you look at an entry, decide the only number that matters: how much of your account you are willing to lose if this trade is wrong. For most people learning, that number is small - somewhere around one percent. On a £2,000 account, that is £20. Not £20 of margin. £20 gone, if the stop is hit.

Now that number is fixed, everything else is arithmetic. You find your setup, you place your stop where the idea is genuinely invalidated - not where it happens to give you a nice round number - and you measure the distance. A stop 40 pips away and a £20 risk gives you exactly one position size. There is no judgement left to make, and no room to talk yourself into something larger.

The uncomfortable part is what this reveals. A wide stop forces a small position, and a small position on a trade you feel strongly about feels like a waste. That feeling is precisely the thing that ruins accounts, and learning to sit with it is most of the job.