Position sizing: the part that decides whether you survive
Being right about direction and wrong about size is still a bad outcome.
5 minute read · updated with the phase that shipped this page
Most explanations of trading spend their time on prediction and almost none on size, which is backwards. A correct view held at the wrong size either barely matters or ends the account.
The Kelly criterion gives the fraction of a bankroll that maximises long-run growth given a probability estimate and a price: f = (q − p) / (1 − p). It is useful as an upper bound and dangerous as a target, because it assumes your q is exact. It never is. Most practitioners who use it at all use a fraction of it.
A simpler rule that survives contact with reality: decide in advance the maximum you are willing to lose on a single position, and size from that number backwards. If the loss you can accept buys a position so small the outcome is irrelevant, the trade is not worth taking.
Qvicom Signal's calculator shows the Kelly fraction next to a plain warning, and the virtual portfolio caps a single order. Neither is advice about your money; both are there so the arithmetic is visible before the decision.
- What is the most I am willing to lose here, in dollars?
- What size does that imply at this price?
- If this position went to zero, would I change how I trade tomorrow?
Educational material only. Qvicom Signal is not a broker, exchange or adviser, cannot place orders, and does not accept deposits or wagers.