Fixed fractional sizing - GetProfitable

Fixed fractional is the default professional method and the one most retail rules imitate. You pick a fraction f - commonly 0.25% to 1% - and each trade risks f times current equity.

It has two useful properties. Position size compounds automatically as equity rises, and it de-levers on the way down: after a 20% drawdown each trade risks 20% fewer dollars, which stretches the losing streak you can survive. Mathematically you can never be fully wiped out by stopped-out trades alone, only ground down, which is why risk-of-ruin under fixed fractional is really risk of falling below a threshold.

The costs are real. Recovery is slower than under flat sizing because you are smallest right when the good trades arrive, and the method assumes your stop actually holds. One gap-risk event that blows through the stop breaks the arithmetic entirely.

See it drawn

Original diagrams for the ideas on this page. Illustrative, not real market data.

Working out a position size. Three numbers decide how big a trade is: the account, the share of it put at risk, and the distance from entry to stop. One percent of $25,000 is a $250 budget, and a $0.50 stop divides into that 500 times.

Equity curve and drawdown. An account balance plotted month by month. The fall from the $16,000 peak to the $12,000 trough is a 25% drawdown, and the shaded area lasts until the balance climbs back to the old peak.