Foundations 4 / 5
Foundations · Level 0Lesson 4 of 4

Risk per trade and position size: how much to buy

Where to buy gets the attention; how much to buy decides whether you survive being wrong. Position size is arithmetic, and it is the part of trading you fully control.

You will learn
  • How to size a position from your risk and your stop
  • How likely long losing streaks are, even with a fair coin
  • Why a loss of 50% needs a gain of 100% to recover

Before you start: The lessons on spot and futures, and on orders.

Start from the loss, not the gain

Decide first how much of the account one trade may lose — the risk per trade, often 1% or less. Then decide where the trade is wrong: the stop. The position size follows:

position = (account × risk) ÷ distance to the stop

With $10,000 and 1% risk, a trade may lose $100. If the stop is 5% below the entry, the position is $100 ÷ 5% = $2,000. If the stop is 1% away, the same $100 allows a $10,000 position. The risk stays the same; the size changes with the stop.

Position size — a $10,000 account buying BTC at 80,154, its close on 25 October 2026. Risking 1% with a stop 5% away: a $2,000 position (0.0250 BTC), a $100 loss if the stop is hit, $9,044 left after 10 such losses in a row, and 29 losses in a row before a quarter of the account is gone. Risking 5% with a stop 1% away: a $50,000 position, which needs 5× leverage, and 6 losses in a row lose a quarter.

Losing streaks are normal

Even a strategy that wins half its trades loses many in a row sometimes. Over 100 independent trades with a 50% chance of winning each, the chance of at least 5 losses in a row somewhere is 81%; of at least 7, 32%; of at least 10, 4%. Size positions so that a streak like that is survivable — at 1% risk, ten losses in a row cost under 10% of the account.

A big loss is hard to win back

A loss and the gain that undoes it are not the same size, because the gain starts from a smaller amount. After −10% you need +11%; after −25%, +33%; after −50%, +100%.

Drawdown — BTC from its all-time high of 126,200 in the week from 6 October 2025. It fell below 100,960 (−20%) in the week from 3 November 2025 and below 63,100 (−50%) in the week from 2 February 2026. Its low, 57,800 in the week from 29 June 2026, was 54.2% below the top: getting back needed +118.3%. On 25 October 2026 it stood at 80,154, 36.5% below the top, with +57.4% to go.

Check yourself · 1 of 3Account $5,000, risk 2%, stop 4% below the entry. What is the position size?
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Risk: 2% of $5,000 = $100. Position: $100 ÷ 4% = $2,500.

Check yourself · 2 of 3An account falls 50%. What gain brings it back?
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Half the money has to double to return to where it was.

Check yourself · 3 of 3A strategy wins half its trades. Over 100 trades, how likely is a run of at least 5 losses?
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Long streaks are normal even with a fair coin; sizing has to survive them.

Takeaways
  1. Decide the loss first: position = account × risk ÷ stop distance.
  2. A closer stop allows a bigger position for the same risk — not a smaller risk.
  3. Losing streaks of 5 or more are normal over 100 trades.
  4. A −50% drawdown needs +100%; BTC's −54% needed +118%.
  5. Leverage adds a second exit: liquidation. Keep the stop before it.

Open BTC in the terminal — the AI Brief lists key levels across timeframes and the typical range of the next hours

Further reading

Education only, not financial advice · Updated 28 Oct 2026 · Data: Binance · Report a mistake