Position sizing is the part of trading that compounds. Entries and exits get most of the airtime, but it is the bet size — and how it scales with edge and risk — that determines whether a consistent process turns into a consistent equity curve.
Start with a fixed fractional base
A fixed fractional model risks a constant percentage of account equity per trade. The percent itself matters less than the discipline of applying it consistently across every setup.
- Define risk per trade as a fixed percent of equity (commonly 0.5%–1.5% for active intraday).
- Translate that to position size by dividing risk-rupees by stop-distance.
- Reset the calculation every session — never carry a sizing assumption from yesterday.
Layer conviction on top — carefully
Conviction should adjust the size of a trade inside a tight band, not change the model entirely. A reasonable approach: a baseline 1.0x, with a band of 0.5x–1.5x. Anything beyond that range is no longer a size decision — it is a strategy decision.
Cap aggregate exposure
No single trade explains a bad day. Concentrated days do. Cap total open risk across all positions at a multiple of single-trade risk — many professional desks use 3x to 5x of single-trade risk as the ceiling.
Asymmetric setups deserve asymmetric rules
When the structural reward-to-risk is 5:1 or better and the stop is structural rather than discretionary, you can scale into the trade in clips rather than all at once. The trade earns size by working, not by being believed in.