# Position sizing & risk per trade

> How much to bet is bigger than what to bet on.

Source: https://www.texttoquant.com/academy/position-sizing
Level: Intermediate · 6 min · lesson 9 of 12

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The same entry signal can be a disaster or a winner depending on how you size and where you stop. Position sizing is quietly the biggest lever on the shape of your equity curve.

## Risk a fixed fraction, not a fixed quantity

Professional sizing risks the same small percentage of equity on every trade, say 1%. Because your stop defines how far price can move against you, the stop distance sets the position size automatically: wider stop, smaller position, same dollar risk. This is also the engine's default when you say nothing about size.

## Volatility aware stops

A fixed 5% stop is too tight for a wild market and too wide for a calm one. An ATR stop places the stop a multiple of the market's typical range away, so risk stays consistent across assets and regimes. This example risks 1% with a 2x ATR stop.

## Feel the drawdown

Run this, then find Position size in the parsed strategy. It reads 1% risk per trade. Change it to 3%, run again, and watch how sizing, not the entry, controls the depth of the drawdown you'd actually have to survive. The entries are identical in both runs. A great signal you can't hold through its drawdown earns you nothing.

## Try it

```
Buy BTC on a MACD bullish cross, risk 1% per trade with a 2 ATR stop and a 3:1 take profit, on 1D, last 3 years.
```

Run it: https://www.texttoquant.com/terminal?q=Buy%20BTC%20on%20a%20MACD%20bullish%20cross%2C%20risk%201%25%20per%20trade%20with%20a%202%20ATR%20stop%20and%20a%203%3A1%20take%20profit%2C%20on%201D%2C%20last%203%20years.&parse=1

**Takeaway:** A mediocre edge with great risk control beats a great edge you can't hold through the drawdown.

## Check yourself

You risk a fixed 1% per trade. What does a wider stop do to the position?

1. Makes it larger, to make up for the wider stop
2. Changes nothing about its size
3. Makes it smaller, so the dollar risk stays the same

Answer: 3. Risk is stop distance times position size. Hold the risk fixed and a wider stop must mean a smaller position.

Terms used: [position-sizing](https://www.texttoquant.com/academy/glossary#position-sizing), [atr-stop](https://www.texttoquant.com/academy/glossary#atr-stop), [r-multiple](https://www.texttoquant.com/academy/glossary#r-multiple), [max-drawdown](https://www.texttoquant.com/academy/glossary#max-drawdown), [macd](https://www.texttoquant.com/academy/glossary#macd)