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Calculating optimal position size based on risk tolerance and account size.
Position sizing determines how much capital to allocate to each trade. It's the single most important risk management decision you make — more important than entry timing, indicator selection, or even trade direction.
Key insight: You can have a 70% win rate and still blow your account with bad position sizing. Conversely, a 40% win rate with proper sizing and risk/reward can be consistently profitable. The math of risk management is more powerful than the math of prediction.
The standard approach is the percent risk model: risk a fixed percentage of your account (1-2%) per trade. Your position size is then calculated based on your stop-loss distance. Wider stop = smaller position. Tighter stop = larger position.
Apply this concept in combination with others. No single concept tells the whole story - confluence is key.
The Academy teaches this concept through structured lessons with real chart examples.
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