Fixed Fractional Position Sizing: The Professional Standard
Risk a fixed percentage of your account on every trade. This simple rule, applied consistently, is the foundation of professional capital management.
The Core Principle
Fixed fractional position sizing means you risk a predetermined percentage of your current account equity on every trade — typically between 0.5% and 2%. If your account is $10,000 and you risk 1%, your maximum dollar loss on any single trade is $100.
The Calculation
Step 1: Determine risk amount = Account Equity × Risk Percentage
($10,000 × 1% = $100)
Step 2: Determine stop loss in pips
(e.g., 25 pips based on your setup)
Step 3: Calculate pip value for your lot size
(Standard lot: $10/pip, Mini: $1/pip, Micro: $0.10/pip)
Step 4: Calculate lot size = Risk Amount ÷ (Stop Loss Pips × Pip Value)
$100 ÷ (25 × $10) = 0.4 lots (round down to 0.4 standard lots or 4 mini lots)
Why Fixed Fractional Works
During drawdown, your position sizes automatically decrease (because your equity is smaller), which reduces the speed of further losses. During profit growth, your sizes automatically increase (bigger equity), which compounds gains. This natural scaling is the key advantage over fixed dollar-amount sizing.
Choosing Your Risk Percentage
For accounts under $25,000: 0.5–1% per trade
For accounts $25,000–$100,000: 0.5–1.5% per trade
For accounts over $100,000: 0.25–1% per trade
These ranges assume a positive-expectancy strategy. The smaller the account, the lower the risk percentage should be to ensure survival through variance.