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Fixed Fractional Riskthe same percentage every time

Evidence: ModerateBeginnerRisk · Position sizing

Risk the same fraction of the account on every trade. The position size is whatever makes that true given the stop distance — so a wide stop means a small position and a tight stop means a large one, automatically.

The rule people actually follow is the opposite: a familiar lot size, with the stop placed wherever there is room. That is a fixed position, which means the risk changes every trade without anyone deciding that it should.

This is a sizing rule, not a trade. It sits on top of whatever entries you run, and its effect is on the shape of the equity curve rather than on whether any individual trade wins.

Applies to
Every strategy in this library, without exception
Timeframe
Any
The formula
size = (account × risk%) ÷ (stop distance × value per point)
Typical setting
0.5%–1% per trade for a discretionary account · lower when several positions are correlated
Tools
Account balance · stop distance in points · the instrument's value per point

Valid setup

RK-01 · FIXED FRACTIONAL RISK — ACCOUNT EQUITY the same signals, risked at a constant 1% of the running balance — losses shrink the size automatically EQUITY 94.5 98.4 102.4 106.3 110.2 114.2 118.1 SIZE RISING WITH THE BALANCE LOSING RUN — each trade risks 1% of LESS SIZE RECOVERING, SLOWLY 10-period mean of the equity curve starting balance peak before the losing run trough — a 13% drawdown needs 15% to recover 1 2 3 100.0 112.0 97.0 ① Stop distance decides the size — every single trade ② Through the drawdown, 1% is 1% of a smaller number ③ That is what makes ruin from ordinary losses impossible ④ Recovery is slower for the same reason ⑤ Round the lot size down, always ⑥ Spread belongs inside the stop distance

Exact rules

When it applies

  • Compute the stop first, from the structure of the trade. Then compute the size from it. Never the other way round.
  • Use the same percentage for every trade of a given strategy. Varying it by conviction is a discretionary overlay and it needs its own testing before it is allowed.
  • Recompute from the current balance, not the starting one. That is what makes losses shrink the size automatically and wins grow it.
  • Round the lot size down. Rounding up is a small, permanent increase in risk that nobody notices.

The risk cap

  • 0.5% to 1% of the account per trade for most retail accounts.
  • Cap the total open risk across all positions — 2% to 4% is a reasonable band. Ten positions at 1% each is a 10% risk if they move together, and they will.
  • Include spread and commission in the stop distance. A 10-point stop with a 2-point spread is a 12-point risk and sizing that ignores it is 20% too large.

Sizing and review

  • Review the actual realised risk monthly: take your worst ten losses and check each against the percentage you intended. Most traders discover a gap here.
  • The size falling after a losing run is the mechanism working, not a problem to override. It is the reason fixed fractional sizing cannot ruin an account on its own.
  • It is also why recovery is slow — the size that shrank on the way down is the size trying to climb back.

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More from Risk & position sizing

Volatility-Parity Sizingequal risk, not equal lotsFractional Kellythe optimal size, and why nobody trades itCorrelation-Adjusted Exposurefive dollar pairs is one trade

Trading carries risk and most retail accounts lose money. Nothing on this page is financial advice or a recommendation to trade. The chart is an illustration of the rules on constructed candles — it is not a record of a trade and not a backtest.