Trading glossaryReviewed 16 July 2026
Definition
Position sizing is the process of selecting trade quantity so potential loss and total exposure remain consistent with predefined account-risk limits.
In market context
A sizing method can combine account equity, acceptable loss, entry price, planned exit, contract value, leverage, and expected slippage. Correlated positions and gaps can make several apparently small trades behave like one large exposure or lose more than planned. Sizing limits damage from a wrong decision but cannot make a poor strategy profitable or guarantee that an exit executes at its selected level.
Risk context
A size calculated from stop distance understates risk when price can gap through the stop or liquidity is insufficient.
Source
Use the primary source for fuller regulatory or market context.