Trading Strategies
Position Sizing
Choosing how many contracts to trade so that a normal loss is an affordable fraction of your account or drawdown. The most controllable edge a trader has.
In plain English
Sizing converts a stop distance into contracts: decide the dollar risk per trade, divide by the stop's dollar value per contract, trade that many. On prop accounts the budget is the drawdown, and a common rule is risking 5 to 10 percent of remaining drawdown per trade, small enough to survive a losing streak.
Micros make the math precise. The most common evaluation failure is not a bad strategy but full-size trading against a drawdown built for half size.
- With $1,600 drawdown remaining and a 10 point ES stop ($500 per contract), 8 percent risk is $128: one MES at $50 per 10 points, or wait for a tighter setup.