Position Sizing

Determining capital allocation per trade

What is Position Sizing?

Position Sizing The process of determining how many contracts or how much capital to allocate to a single trade relative to total portfolio size. Proper position sizing limits the damage from any single losing trade. Common guidelines include risking no more than 1-5% of portfolio value per trade and limiting total portfolio delta and theta exposure.

Complete Definition

The process of determining how many contracts or how much capital to allocate to a single trade relative to total portfolio size. Proper position sizing limits the damage from any single losing trade. Common guidelines include risking no more than 1-5% of portfolio value per trade and limiting total portfolio delta and theta exposure.