Position sizing begins with the loss scenario
Position sizing asks how much exposure a hypothetical decision creates. Starting with the amount you hope to earn often hides the more important calculation: what happens when the idea is wrong or execution is worse than expected?
Write the assumptions first
Imagine a paper account and an illustrative ten-dollar planned loss allowance. If the assumed exit distance is twenty pips and each pip is worth fifty cents at the selected size, the price movement alone equals ten dollars. Fees and slippage would increase that loss.
Do not confuse the example with a recommendation
There is no universal percentage that makes leveraged trading safe. Personal finances, product terms and the possibility of gaps matter. This arithmetic is an educational exercise for seeing how size, distance and cash impact connect.
Change one input
Double the position while leaving the exit distance unchanged, then double the exit distance while leaving size unchanged. Both changes increase the modeled loss. A spreadsheet should show each assumption clearly and include a cost allowance. If the platform’s minimum trade size exceeds the exposure your exercise permits, the conclusion is to skip that simulated setup rather than quietly increase the allowance.
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