Position size is how much of a coin you buy or sell on one trade, and it should come from your stop, not from a hunch. The formula is simple: position size = account × risk % ÷ stop distance %. With a 10,000 USDT account, 2% risk and a stop 4% away from your entry, the position is 5,000 USDT. If the stop is hit you lose 200 USDT, before fees and slippage, whatever the coin or the price.
Most beginners do it the other way round. They pick an amount that "feels right", place a stop somewhere, and only then find out what the trade can cost. This guide turns that around: you decide the loss first, and the size follows.
- Position size = account × risk % ÷ stop distance %. Decide the stop first, then the size.
- A stop twice as far away halves the position, so the loss at the stop stays the same.
- Risking 1% does not mean investing 1%. The rule caps the loss at your stop, not the size of the position.
- Leverage changes the margin you lock up, not the loss at your stop. But your liquidation price must sit beyond your stop.
- In Navixa's published Bitcoin backtest, the largest loss was -1.0R, the planned risk, and the longest losing streak was 2 trades.
The position sizing formula
Binance Academy gives the formula as position size = account size × account risk ÷ invalidation point (updated April 2026). The invalidation point is the distance from your entry to your stop-loss, the level where your trade idea is proven wrong. In four steps:
- Account size: the capital you set aside for this strategy, not everything you own.
- Risk per trade: the share of that account you accept losing if the stop is hit. Multiply the two to get the money at risk.
- Stop distance: how far the stop is from your entry, as a percentage of the entry price.
- Divide: the money at risk divided by the stop distance is your position size.
A worked example
The numbers below are made up to keep the arithmetic clear. They are not a forecast.
- Account: 10,000 USDT.
- Risk per trade: 2%, which is 200 USDT.
- Entry on Bitcoin at 100,000 USDT, stop at 96,000 USDT. The stop is 4,000 USDT, or 4%, below the entry.
- Position size: 200 ÷ 0.04 = 5,000 USDT, which is 0.05 BTC.
Check it: if Bitcoin falls from 100,000 to 96,000, 0.05 BTC loses 0.05 × 4,000 = 200 USDT. That is exactly the 2% you chose.
Now move the stop and keep the risk the same:
A wider stop gives a smaller position, and a tighter stop gives a larger one. Binance Academy puts it plainly: a stop twice as far from your entry cuts the allowable position size in half. Notice the top bar, too. With a 1% stop, the formula asks for a position twice the size of the account. On futures that means 2× leverage; on spot it is not possible, so you would need a wider stop or a smaller risk.
Count fees and slippage in the loss
Fees and slippage make the real loss slightly bigger than the planned one. Binance Academy recommends including estimated fees in your loss budget. As an example, the Navixa Price Action backtest uses 0.05% commission per side. On the 5,000 USDT position above, that is 0.1% for the round trip, or 5 USDT, which is 2.5% of the 200 USDT you planned to risk. Slippage, the gap between the price you expected and the price you got, can be larger in fast-moving or thin markets. Navixa Price Action counts fees inside the planned risk: its largest backtested loss is recorded as -1.0R, fees included.
Why a small risk percentage matters
Losing streaks are a normal part of any strategy, and the risk percentage decides how much of the account one streak takes. If you lose a fixed share of the account on each trade, the balance after n losses in a row is (1 − risk)ⁿ.
Recovery is the part people underestimate. Losses and gains are not symmetrical: a 50% drawdown requires a 100% gain just to get back to the starting point, as Pepperstone's drawdown guide shows. At 2% risk, five losses in a row cost about 9.6% of the account, which is uncomfortable but recoverable. At 20% risk the same streak leaves a third of the account. Our guide to trading drawdown management goes deeper on recovery and on cutting risk after losses.
For scale, the longest losing streak in Navixa's published Bitcoin backtest was 2 trades. That is one coin and 58 positions, so it tells you what happened there, not what the limit is.
1%, 2% or something else?
There is no universal number, and nobody can tell you the right one without knowing your account and your nerves. Two reference points:
- Binance Academy calls 1% a more conservative starting point for crypto, a modified version of the traditional 2% rule, given how far prices can move in a day.
- Navixa Price Action risks 2% of the balance per trade by default, and its settings suggest 1% to 1.5% when you run several coins at once. Open risks add up: three open positions at 2% each put 6% of the account at risk if all three stops are hit.
Whatever you pick, apply it to every trade. The point of the rule is consistency: the same planned loss each time, so no single trade can decide your account.
Leverage does not change the risk, only the margin
A common mix-up: "I use 10× leverage, so I risk 10× more." Not quite. Your risk is set by the position size and the stop distance. Leverage only decides how much of your own money the exchange locks up as margin (margin = position ÷ leverage). With the 5,000 USDT position from the example:
| Leverage | Position | Margin locked | Loss if the stop is hit |
|---|---|---|---|
| 1× | 5,000 USDT | 5,000 USDT | 200 USDT |
| 5× | 5,000 USDT | 1,000 USDT | 200 USDT |
| 10× | 5,000 USDT | 500 USDT | 200 USDT |
Higher leverage frees up margin, but it also pulls your liquidation price closer to your entry. That is where the real danger sits.
On futures, your liquidation price must sit beyond your stop. If the exchange liquidates the position before your stop is reached, the loss is no longer the one you planned. Check the liquidation price before you enter, not after.
Binance's support page on the USDⓈ-M futures liquidation price (updated December 2025) shows the cross-margin formula. It depends on your wallet balance, the maintenance margin rate for your position's size tier and the mark price. For the details of mark price and liquidation, see our guide to Binance futures risk management.
Position sizing in TradingView strategies
If you backtest on TradingView, you will meet the order-size setting. In Pine Script, the default order size can be a fixed number of contracts, a fixed cash amount, or a fixed percentage of equity. None of the three fixes the loss at the stop:
| Method | What stays fixed | Loss at the stop |
|---|---|---|
| Fixed contracts or units | The quantity | Changes with the stop distance and the price |
| Fixed cash amount | The money in the trade | Changes with the stop distance |
| Percent of equity | The share of the account in the trade | Changes with the stop distance |
The difference between "percent of the account in the trade" and "percent of the account at risk" matters. A position worth 20% of your equity with a 5% stop risks 1% of the account. The same 20% position with a 20% stop risks 4%. A strategy that sizes from the stop works the quantity out for each trade, so that hitting the stop costs the chosen risk.
How Navixa Price Action applies it
Navixa Price Action works that way. At the breakout close it sets the stop, two targets and the position size together, so each trade's risk is known at entry. The default is 2% of the balance, and the leverage cap is a setting too.
The published backtest ran on the Binance BTCUSDT perpetual, 4-hour chart, from October 2019 to October 2026, starting with 10,000 USDT and including 0.05% commission per side and 5 ticks of slippage:
| Figure | Result |
|---|---|
| Positions | 58 |
| Largest loss | 210.97 USDT, recorded as -1.0R: the planned risk, fees included |
| Longest losing streak | 2 trades |
| Maximum drawdown | 6.03% |
| Average trade | +0.40R |
These are past results on one coin, not a promise. They show what fixed risk looks like in practice: the worst single trade matched the plan instead of exceeding it. Every figure is on the Price Action results page.
Common sizing mistakes
- Sizing from margin instead of from the stop. Having enough margin for a huge position says nothing about what it costs if the stop is hit.
- Widening the stop without shrinking the position. Moving a stop further away while keeping the size multiplies the loss you accepted.
- Forgetting costs. Fees, funding and slippage all sit on top of the planned loss.
- Letting risk drift. Raising the risk percentage after a few wins, or doubling after a loss, defeats the purpose of a fixed rule.
- Ignoring open risk. Each trade may risk 1% or 2%, but the total across all open trades is what counts.
FAQ
What is the 1% rule in crypto trading?
It limits the loss on a single trade to 1% of your account if the stop is hit. It does not mean you invest only 1% of your capital: with a 5% stop, a 1% risk on a 5,000 USDT account lets you hold a position of 1,000 USDT.
How much should I risk per trade?
There is no single right answer. Binance Academy describes 1% as a conservative starting point and 2% as the traditional rule, and Navixa Price Action defaults to 2%. What matters is that the number is fixed in advance and that you can live with several losses in a row.
Do I need a stop-loss to size a position?
For risk-based sizing, yes. Without a stop there is no distance to divide by, so there is no defined risk. Strategies that work without a stop need another limit. Navixa Smart DCA, for example, is spot-only with no leverage and no stop-loss by default, and it sizes its whole ladder of buy orders to your balance before the first buy.
Does the formula work on spot?
Yes, with one limit: a spot position cannot be larger than your balance. If the formula gives a bigger number, you can only buy what you can afford, so your real risk is lower than planned.
Should I change my size after a loss?
The formula uses your current balance, so the position shrinks a little after a loss and grows after a win. Changing the risk percentage itself because of a streak is a different decision, and a common source of trouble. Keep it fixed unless you have a written reason to change it.
The bottom line
Position sizing is arithmetic, not prediction: choose the loss you accept, find where your idea is wrong, and let the formula give the size. Do it before every trade and the worst case is already known when you enter. If you want to see fixed risk applied to every trade, read how the Price Action strategy sets its stop, targets and size, and check the published numbers on its results page.
