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  1. Home
  2. /Glossary
  3. /Position Sizing
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trading

Position Sizing

Determining how much of your portfolio to allocate to a single trade based on your risk tolerance and the trade's risk/reward profile.

Definition

Determining how much of your portfolio to allocate to a single trade based on your risk tolerance and the trade's risk/reward profile. A common rule is risking no more than 1-2% of your account on any single trade. Getting position sizing right matters more than your entry and exit strategy.

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Related Terms

Risk Management

Strategies for limiting potential losses in your investments.

Portfolio

Your collection of investments across different assets.

Stop Loss

An order to sell automatically if price drops to a specified level.

Accumulation Phase

A period when smart money quietly buys up an asset before a major price move.

Annualized Return

The average yearly return on an investment, calculated to account for compounding.

Arbitrage

Profiting from price differences of the same asset across different markets.

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