Master the art and science of position sizing in CFD trading. Learn how to calculate optimal trade sizes that protect your capital while maximizing profit potential across different market conditions.
Many traders obsess over finding the perfect entry point while ignoring position sizing—arguably the most critical aspect of trading. Position sizing determines how much you risk on each trade and directly impacts your long-term survival and profitability in CFD markets.
You can be right 60% of the time and still lose money with poor position sizing. Conversely, you can be right only 40% of the time and be highly profitable with proper position sizing.
The most common and effective approach for CFD traders:
This ensures you never risk more than your predetermined percentage per trade.
Account Balance: $10,000
Risk per Trade: 2%
Entry Price: $100
Stop Loss: $95
Risk per Share: $5
Position Size = ($10,000 × 2%) ÷ $5 = 40 shares
Total position value: $4,000 | Maximum loss: $200
Mathematically optimal position sizing based on win rate and average win/loss ratio.
Where: f = fraction to bet, b = odds, p = win probability, q = loss probability
Adjust position size based on market volatility using ATR (Average True Range).
Larger positions in low volatility, smaller in high volatility
Choose your risk percentage based on your experience and account size:
New traders, large accounts, or uncertain market conditions
Experienced traders with proven strategies
Professional traders with strong risk management
Even the most aggressive professional traders rarely risk more than 5% on a single trade. Higher percentages lead to inevitable account destruction.
Considerations: Lower volatility, high leverage available, 24-hour markets
Considerations: Moderate volatility, good liquidity, market hours limitations
Considerations: High volatility, external factors, storage costs
Adjust your position sizes based on:
Essential tools for accurate position sizing:
Create custom calculators with your specific risk parameters and market conditions.
Most CFD platforms include built-in position sizing calculators and risk management tools.
Advanced traders often scale into positions rather than entering all at once:
Total intended position: 100 shares
This approach reduces average entry price and manages timing risk.
Proper position sizing also helps manage emotions:
Every position size decision is a risk management decision. Make it consciously, systematically, and consistently. Your future self will thank you.