Glossary / Risk

Position sizing

Position sizing is the decision of how much capital to commit to any single holding. It is separate from the decision of what to hold, and it is the input that determines what any individual outcome does to the whole.

How it is measured

How is position sizing measured?

Common frameworks express size as a fixed fraction of total capital, or scale size so that a defined adverse move costs a constant amount — which makes the size inversely proportional to the security's typical movement, often measured with ATR. Each framework is a convention with tradeoffs, not a derived optimum.

Why it matters

Why does position sizing matter to a swing trader?

Sizing determines how much any single outcome matters, which is why two people acting on identical information can end up in entirely different situations. It is also the reason drawdown arithmetic is worth understanding before it is needed rather than after. Appropriate sizing depends on circumstances specific to each person — Tapeline has no knowledge of any of them, does not model them, and does not suggest sizes.

Related

See this in the product

Risk disclosure · Full methodology

Related terms

Drawdown
Drawdown is the decline from a peak value to the lowest point reached before a new peak, expressed as a share of that peak.
Average true range
Average true range is the average size of a security's daily trading range over a recent window, where the range is defined to include any overnight gap.
Volatility
Volatility measures how much a security's price varies around its own average over a period.
Stop-loss order
A stop-loss is a resting instruction to a broker that becomes active when price reaches a specified trigger level.

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General information about market vocabulary, written to be descriptive rather than prescriptive. Not investment advice — see the risk disclosure.