# Position Sizing: The Math That Keeps You Alive

> Calculate proper position size for day trading. Fixed-risk, fixed-fractional, and Kelly criterion — plus why most traders oversize.

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- Content type: Trading guide
- Last reviewed: 2026-04-25

## Quick Answer

Calculate proper position size for day trading. Fixed-risk, fixed-fractional, and Kelly criterion — plus why most traders oversize.

## Key Takeaways

- The fixed-risk model (the only one that matters for beginners): Risk a fixed dollar amount per trade, calculated as a percentage of your account.
- Why "set size by gut" blows accounts: Unsized discretionary traders oversize on high-conviction trades and undersize on their actual edge.
- When to consider fractional Kelly: Once you have 200+ trades of data and a stable win rate + R:R, you can consider fractional Kelly.

## The fixed-risk model (the only one that matters for beginners)

Risk a fixed dollar amount per trade, calculated as a percentage of your account. The most common: 1% per trade, max 3% aggregate open risk. Position size = (account × 1%) / (entry − stop). So on a $50,000 account with entry at 100 and stop at 99, you risk $500 and can buy 500 shares. This produces consistent risk regardless of instrument, volatility, or timeframe.

## Why "set size by gut" blows accounts

Unsized discretionary traders oversize on high-conviction trades and undersize on their actual edge. The result: one big losing trade wipes out a month of small winning trades. Fixed-risk sizing flattens the emotional distortion. Every trade feels identical because the dollar risk is identical. This predictability is what builds discipline.

## When to consider fractional Kelly

Once you have 200+ trades of data and a stable win rate + R:R, you can consider fractional Kelly. Half-Kelly is the industry standard because full Kelly produces uncomfortable drawdowns. For most prop firm traders, 1% fixed risk is safer than half-Kelly because the drawdown tolerance is tight.

## FAQ

### What if I'm on a $5,000 account — can I risk more than 1%?

You can, but the drawdown math doesn't change. 2% per trade with a 10-trade losing streak is a 20% drawdown — ugly but recoverable. 5% per trade is not.

### Should my risk scale with conviction?

Statistically no — traders are bad at estimating their own conviction. Most "high conviction" trades have the same expectancy as normal trades. Keep risk fixed.

## Sources and Review Notes

- [FundedReady methodology](https://www.fundedready.org/methodology/): Review process, simulator scope, and educational disclaimers.

FundedReady content is educational. It is not financial advice, a signal service, or a promise that a trading strategy will be profitable.