Lesson 05 · 8 min read
Position sizing — the math that keeps you in the game
Risk management sets the ceiling; position sizing makes you obey it. This lesson converts percentages into concrete lot and contract counts — the step most traders skip and the reason a 'safe' strategy still blows the drawdown.
The universal formula
Position size = (Account × Risk %) ÷ (Stop distance × pip/point value). Every instrument and every firm reduces to this equation. Master it once and you can size anything.
Example 1 — forex: $100,000 account, 1% risk ($1,000), EURUSD stop 25 pips, pip value $10 per standard lot. Size = 1,000 ÷ (25 × 10) = 4 lots. If the stop is 40 pips, size drops to 2.5 lots. Same risk, different size — that is the whole point.
| Input | Forex example | Futures example |
|---|---|---|
| Account | $100,000 | $50,000 (Apex 50k) |
| Risk % | 1% = $1,000 | 1% = $500 |
| Stop distance | 25 pips | 10 points (ES) |
| Value per unit | $10/pip per lot | $50/point per contract |
| Position size | 4.0 lots | 1 contract (capped) |
Futures: contracts are lumpy
Futures do not allow fractional contracts. On an Apex $50k with a $1,500 trailing limit, a 10-point ES stop with $50/point means one contract risks $500 — fine. But a 25-point stop risks $1,250 (83% of the limit) — no longer fine. The fix is either a tighter stop or a smaller micro contract (MES at $5/point).
Rule: if the smallest contract size risks more than 1.5% of the account, the trade does not pass the filter — skip it or find a closer entry.
- MES (micro) = $5/point — the sizing tool for small and trailing accounts
- NQ moves ~2x ES per point — halve your size on Nasdaq
- News spikes widen stops — pre-compute your size, never estimate live
Scaling as the account grows
Your risk % stays constant but the dollar amount grows with the account. On a funded $100k at 1%, you risk $1,000; after the account compounds to $120k, the same 1% is $1,200. This is how professionals let winners run without ever feeling overexposed.
The inverse is the professional's edge after a bad patch: drop to 0.5% for five trades after any 2% weekly loss. Cutting size when confidence (and equity) is low is what separates funded careers from endless evaluation loops.
- Compute size BEFORE entering — never during
- Round DOWN to the safe lot/contract count
- After any 2% weekly loss: halve size for the next 5 trades
Key takeaways
- Position size = (Account × Risk%) ÷ (Stop × unit value) — one formula for everything
- Same risk % produces different lot sizes for different stops
- Futures are lumpy: if 1 contract risks >1.5%, skip or use micros (MES)
- Cut size in half after any 2% weekly loss — protect the comeback
Frequently asked questions
What risk % should I use in the evaluation?
0.5–1% of the initial balance. It is large enough to reach the profit target in 2–4 weeks and small enough that no realistic losing streak breaches the drawdown.
How do I size a trade with a 1.5-point stop on ES?
Risk ÷ (points × $50). With $500 risk and a 1.5-point stop: $500 ÷ $75 = 6.6 → 6 contracts. But check the trailing limit first — 6 contracts in one idea may exceed your per-idea cap.
Should size change after I get funded?
The % stays, the dollars grow with the balance. Many traders keep the evaluation size for the first funded month as a buffer — a funded breach costs more than an evaluation fee.