#PositionSizing #RiskManagement
Entry is USD 100 and the assumed stop fill is USD 95. With USD 500 of planned risk, would you buy 5 units or 100 units?
Answer: 100 units. Each unit has USD 5 of assumed loss, so 500 / 5 = 100. Five units would risk USD 25 under the same assumption.
This is cash-position arithmetic before costs. Contract multipliers, gaps and slippage need separate treatment.
Entry is USD 100 and the assumed stop fill is USD 95. With USD 500 of planned risk, would you buy 5 units or 100 units?
Answer: 100 units. Each unit has USD 5 of assumed loss, so 500 / 5 = 100. Five units would risk USD 25 under the same assumption.
This is cash-position arithmetic before costs. Contract multipliers, gaps and slippage need separate treatment.