Position sizing
Choosing how much of an asset to trade based on how much money you're willing to risk.
Position sizing is deciding how big a trade should be. Instead of picking a number of shares or coins that feels right, you start with how much of your account you are willing to lose and work backward.
A common beginner rule is to risk no more than 1% of the account on one trade. You divide that amount by the distance from your entry to your stop-loss. The answer is how many units to buy.
Sizing this way means a wide stop gives a smaller position and a tight stop gives a larger one, while the money at risk stays the same. It is the main tool that keeps one bad trade from badly damaging an account.
Example: with a $10,000 account and a 1% rule, you risk $100. If your stop is $2 below your entry, you buy 50 units, because 50 × $2 = $100.
New to all of this? Start learning trading from zero.
Educational definition. Not financial advice; no real-money execution.