This article explains very well how to properly calculate position size in your trading and how to properly use leverage and margin within a sound risk management strategy. It also gives the insight how stoplosses play an important part in this context. The art of defining your stoploss is however a totaly separate matter, which you have to master before establishing position size.
The article uses a 2 or 3% risk amount in the calculations. Determining risk amount percentage is also a separate matter and depent a partly on the type of trading (strategy). For most active trading the risk amount would usualy be 1-2% though.
For easy reference i will share the basic calculation of position size:
" Position Size (in $) = Risk Amount (in $)/Distance to Stop Loss (percentage expressed in decimals = percentage / 100)"
Risk amount = 1-3% of total available trading capital (example if capital is $1,000: 2% x 1000 = $20)
The article has trading on bitmex in mind, calculating position size on spot exchanges is slightly different.
Position size in units of the asset = risk amount (in $) / distance to stop loss (in $)
Read the article here
The article uses a 2 or 3% risk amount in the calculations. Determining risk amount percentage is also a separate matter and depent a partly on the type of trading (strategy). For most active trading the risk amount would usualy be 1-2% though.
For easy reference i will share the basic calculation of position size:
" Position Size (in $) = Risk Amount (in $)/Distance to Stop Loss (percentage expressed in decimals = percentage / 100)"
Risk amount = 1-3% of total available trading capital (example if capital is $1,000: 2% x 1000 = $20)
The article has trading on bitmex in mind, calculating position size on spot exchanges is slightly different.
Position size in units of the asset = risk amount (in $) / distance to stop loss (in $)
Read the article here