Position Sizing on a Funded Account: A Practical Guide

Most breached accounts do not die from a bad strategy. They die from good strategies traded at the wrong size. Position sizing is the one skill that decides whether a normal losing streak is a rough week or the end of your evaluation.

The only formula you need

Position size is not a feeling. It is one division:

Position size = money at risk / stop distance

Decide how much the trade may lose, measure how far away your stop is, and the size falls out. Everything else is detail.

Step one: fix your risk per trade

Risk per trade is a fraction of your account you are willing to lose if the stop is hit. On a funded account it should be set relative to your daily loss limit, because that is the line that actually ends your day.

A robust default: never risk more than a quarter of your daily allowance on one trade. On a plan with a 4% daily limit, that means 1% per trade at most, and 0.5% is calmer. With 0.5% risk you can take eight straight full losers before you are even near a 4% daily line. With 2% risk, two losers put you on it.

Step two: measure the stop distance

The stop goes where the trade idea is wrong, not where the loss feels acceptable. Measure the distance from entry to that level in pips, points, or dollars per contract. If the correct stop makes the position too big to afford, the answer is a smaller position, never a tighter stop.

Step three: do the division

A worked forex example on a $100,000 account:

• Risk per trade: 0.5% = $500
• Trade: EURUSD, stop 25 pips away
• Pip value per standard lot: about $10

Size = $500 / (25 x $10) = 2.0 standard lots.

Same account, but a wider 50-pip stop: $500 / (50 x $10) = 1.0 lot. The risk stayed identical; the size halved because the stop doubled. That is the whole discipline: size adapts, risk does not.

An indices example: risking $300 with an 8-point stop on an index CFD worth $5 per point per contract gives $300 / (8 x $5) = 7.5 contracts.

Why fixed lots quietly kill accounts

Trading "my usual 2 lots" on every setup means your real risk swings with every stop distance. A 10-pip stop risks $200; a 60-pip stop risks $1,200. Same lots, six times the risk. Traders who size in fixed lots are running risk they never chose. On an account with hard drawdown lines, that unchosen risk eventually lands on the wrong week.

Sizing around correlation

Two open positions are not always two independent risks. Long EURUSD and long GBPUSD is close to one doubled dollar-direction trade. Count correlated positions as one bucket of risk: if your cap per idea is 1%, the pair of them together should risk about 1%, not 1% each.

When to reduce size further

• After a losing day. The maths of recovery punishes size, and your judgement is worst right after a loss.
• Around major news. Spreads widen and stops slip; the same stop distance can cost more than planned.
• On instruments you trade rarely. Unfamiliar volatility deserves half size until it is familiar.

Related reading: drawdown limits and the trading journal that keeps sizing honest.

Frequently asked questions

What percentage should I risk per trade on a funded account?

A common professional range is 0.25% to 1% per trade. Anchor it to your plan's daily loss limit: keeping one trade at or below a quarter of the daily allowance means a losing streak stays survivable.

Does leverage change how I should size?

No. Leverage changes the maximum size you are allowed to open, not the size you should open. The formula stays risk divided by stop distance regardless of whether the account offers 1:25 or 1:100.

How do I size with a very tight stop?

A tight stop allows a larger position for the same risk, but check the position against your margin and against slippage: very tight stops fill worse in fast markets. If a one-tick slip would meaningfully change the loss, size as if the stop were wider.

Should I increase size when I am winning?

Only by recalculating the same percentages on the new balance. Growing size proportionally with the account is sustainable; jumping size because of confidence is how winning streaks end accounts.