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Fixed lot sizing

Trading the same share or contract count every time regardless of account size or volatility.

Fixed lot sizing means always trading 100 shares, or one contract, or 0.1 lots. It is the simplest method and the honest starting point for a new trader, because it removes one variable while you find out whether you have an edge at all.

It is also the right way to read a backtesting result. With constant size, the equity curve is a straight sum of r-multiples and reflects the strategy rather than the compounding schedule, so two systems can be compared fairly.

Live, it has one serious flaw: risk per trade drifts with both equity and volatility. One contract is 2% of a $20,000 account and 0.2% of a $200,000 account, and one contract in a calm market is a fraction of one contract in a panic. Most traders outgrow it within a year.

Related: fixed-fractional-sizing, risk-normalisation, backtesting, r-multiple

See it drawn

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

How a position size is worked outAccount size, risk per trade and stop distance feed into one box giving the number of shares.ACCOUNT SIZE$25,000your capitalRISK PER TRADE1%of the accountSTOP DISTANCE$0.50entry to stopPOSITION SIZE500 sharesrisk budget: $25,000 × 1% = $250position size: $250 ÷ $0.50 = 500 shares
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.

Educational only, not advice. Spotted an error? Post in Site Feedback.