Position sizing
Volume Profile Analysis glossary · Volume Profile Technicals
Definition
The quantitative determination of how many units of an instrument to trade based on account equity, risk per trade, and stop distance.
Position sizing in plain English
Position sizing is deciding HOW MUCH to trade — how many units to buy or sell — so that if the trade goes wrong, you only lose an amount you've decided in advance is acceptable. It depends on three things: how much money is in your account, how much of it you're willing to risk on this one trade (say 1%), and how far away your "get-out" exit (stop) sits from your entry. It's like packing for a hike based on the trail's length and your pack's limit — you size the load to what you can safely carry, not to how excited you are. Good sizing is what keeps one bad trade from wiping you out, which is why pros treat it as more important than picking winners.
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