๐ How to Calculate Your Position Size (Crypto) Calculate Your Position Size
Position size answers one question before any trade: if this idea is wrong, exactly how much do I lose? Get that number first, and the size follows from it.
Most blown accounts are sizing mistakes, not bad guesses about direction. A trader can be right more than half the time and still go to zero by betting too big on the losers. The fix is a short calculation you do before entering, using three inputs: your account size, the percent you will risk, and the distance to your stop-loss.
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1Decide your account size
This is the capital you are genuinely willing to put at risk in trading, not your net worth and not money you need for rent or savings. Every later number is a slice of this one, so be honest about it.
If the figure would keep you up at night when it dropped, it is too large to use here.
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2Pick a risk percent and find your dollar-risk
Choose how much of the account a single losing trade may cost. Beginners usually start at 0.5โ1%. Then your dollar-risk is account size ร risk percent. On a 10,000 unit account at 1%, that is a 100 unit maximum loss per trade.
At 1% per trade it takes around fifty losses in a row to halve the account, which buys a lot of room to learn.
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3Choose your entry and stop-loss first
Pick the price you will enter at and the price where the idea is plainly wrong, your stop-loss, before you click buy. The stop is your invalidation point, not a hope. Deciding it after entering is how people talk themselves into moving it.
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4Measure the stop distance
Stop distance is the gap between those two prices for one unit: entry price โ stop-loss price. Buy Bitcoin at 65,000 with a stop at 63,000 and the distance is 2,000 per coin.
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5Divide to get the position size
The whole method is one line: position size = dollar-risk รท stop distance. With 200 of dollar-risk and a 2,000 stop distance, that is 200 รท 2,000 = 0.1 BTC. Lose the trade and you lose your 200, as planned.
๐ต risk โ ๐ stop โก๏ธ ๐ช how many units to buy A wider stop means a smaller position, because you are dividing by a bigger number to keep the loss the same.
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6Trim the size for fees and slippage
Your real exit is usually a little worse than the printed stop, because of fees and slippage. Shave the calculated size by roughly 10% in deep-market majors and 20โ25% in altcoins or fast markets. A coin with a thin order book, such as a small-cap meme like Dogecoin on a quiet day, fills worse than one with deep liquidity.
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7Check your portfolio-level risk
One trade at a time is not the full picture. Crypto assets tend to drop together, so six altcoin longs each risking 1% can act like 6% of real risk in a sell-off. Add the risk across every open position and keep that total bounded, not just each trade alone.
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8Place the order and set the stop
Buy the size the math gave you, then actually set the stop-loss order on the exchange. A stop written only on paper does nothing at 3am.
With high leverage the liquidation price sits close, so a single wick can liquidate the position before your stop fires. Keeping leverage low leaves the stop room to work.
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9Double-check and start small
Free position-size calculators can confirm the arithmetic while the habit is new. Run a small amount through the whole process a few times first, so the routine is automatic before the size grows.
โ ๏ธ Common mistakes to avoid
- ๐ฐ Sizing by feel instead of by the number the math allows
- ๐ Entering with no stop-loss, then setting one in a panic
- โ Widening or deleting the stop after entry to avoid the loss
- ๐งฎ Forgetting fees and slippage, so the real loss beats the plan
- ๐ Treating six correlated altcoin longs as six small, separate bets
- โก Using high leverage and getting liquidated before the stop triggers
โ FAQ
- What is the 1% rule in position sizing?
- It means a single trade should cost at most about 1% of your total account if your stop-loss is hit. On a 10,000 unit account that is a 100 unit maximum loss. It refers to the amount you can lose, not to spending 1% of the account on the trade.
- Does higher leverage make my position riskier?
- Your risk is set by your position size and stop distance, not by the leverage number itself. But high leverage moves the liquidation price closer, so a small adverse swing can liquidate you before your stop ever triggers. Keeping leverage low leaves room for the stop to do its job.
- Why does a wider stop-loss mean a smaller position?
- Position size is dollar-risk divided by stop distance. If you hold the dollar-risk fixed and widen the stop, you are dividing by a bigger number, so the size shrinks. A tighter stop allows a larger position for the same risk.
- Do six small altcoin trades really add up to one big bet?
- Often yes. Crypto assets tend to fall together, so six longs each risking 1% can behave like roughly 6% of real risk in a downturn. Add up the risk across every open trade and keep the total bounded, not just each trade on its own.