Position Sizing Guide: How Much to Risk on Every Trade
Trading Psychology · 12 min · Published 2026-03-05
Master position sizing for optimal risk management. Covers fixed risk, Kelly Criterion, and portfolio heat. Free guide by Rami Alame at Tradyom.
Position sizing determines how many shares, lots, or contracts to trade on each position. It's the most important risk management decision you make. Proper position sizing ensures no single trade can significantly damage your account while allowing enough exposure to generate meaningful returns.
Frequently Asked Questions
How much should I risk per trade?
1-2% of account equity for beginners, up to 3-5% for experienced traders with high win rates. Never risk more than you can emotionally handle losing. Rami Alame at Tradyom recommends starting at 0.5-1% while learning.
Should I risk the same amount on every trade?
A fixed percentage risk model adjusts automatically — as your account grows, positions get larger; as it shrinks, they get smaller. Some advanced traders vary risk based on setup quality (more for A+ setups, less for B setups).
What is the Kelly Criterion?
It's a mathematical formula that determines the optimal fraction of capital to allocate to a bet/trade based on edge size. Full Kelly is too aggressive for most traders — use quarter to half Kelly for practical trading.