How to Calculate Position Size for a Crypto Trade
Position sizing converts an acceptable account-level loss into a trade quantity using the distance between entry and stop.
Key takeaways
- choose account risk first
- include fees and slippage
- leverage changes margin, not price risk
The practical problem is not finding more information; it is deciding which details change the risk. Position sizing converts an acceptable account-level loss into a trade quantity using the distance between entry and stop.
Separate facts from assumptions
Start with the amount the account can lose on the idea. Stop distance, fees and possible slippage then determine a defensible quantity; leverage changes margin requirements but not the loss on the full notional position.
Execution is a second decision
Fees, funding, spread, liquidity and slippage can change the realised result. Market data can also become stale. None of these limitations is removed by automation.
Review the outcome fairly
- Choose account risk first. Write down what evidence would satisfy this check and what would make the setup unsuitable.
- Include fees and slippage. Write down what evidence would satisfy this check and what would make the setup unsuitable.
- Leverage changes margin, not price risk. Write down what evidence would satisfy this check and what would make the setup unsuitable.
Judge the quality of the decision separately from the result of one trade. Use the shared risk reminder below for the legal and financial context.
Risk reminder Crypto trading involves substantial risk. Results are not guaranteed. Volatility, fees, funding, liquidity and slippage can affect outcomes.
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