How to calculate position size in crypto

Entries get all the attention. Size decides whether you are still trading in a year.

Most accounts do not end because someone picked the wrong coin. They end because someone picked the right coin with the wrong size. Position sizing is the only part of a trade you control completely — the market decides the rest.

The formula

Everything comes down to one line. You decide what you are willing to lose, and the distance to your stop tells you how much you can buy.

Read it slowly, because the order matters. You do not choose a position size and then place a stop wherever it fits. You place the stop where your idea is proven wrong, and the size falls out of that decision.

A worked example

Say you hold $5,000. You are willing to risk 1% on this trade, which is $50. You want to buy at $60,000 and your invalidation level sits at $58,000, a distance of $2,000.

So a $50 risk buys a $1,500 position. If price reaches $58,000 you lose $50 and nothing about your account has changed in a way that matters. That is the entire point.

Why 1%

The number is not magic, but the arithmetic behind it is unforgiving. Losses compound against you faster than gains recover:

• Lose 10% of an account and you need 11% to get back to even.
• Lose 50% and you need 100%.
• Lose 80% and you need 400%.

At 1% risk, ten losing trades in a row cost you roughly a tenth of the account and you continue. At 10% risk, the same streak ends the account. Streaks of ten are ordinary, not rare.

What changes with leverage

Leverage does not change the formula above. Your risk is still defined by your stop. What leverage adds is a second exit that you do not control: liquidation. The exchange closes the position for you, and it does so on the mark price rather than the last traded price.

Roughly, liquidation distance is the inverse of leverage. At 10× it is about 10% from entry, at 20× about 5%. Put a 4% stop behind 20× leverage and you are not managing risk — you are hoping.

The mistakes that repeat

• Sizing first, stop second. The stop then lands wherever the position allows, which is not where the idea is invalidated.
• Stops too tight for crypto. Wicks are wider here than in equities. A stop inside normal noise gets taken out by noise.
• Ignoring funding. On perpetuals you pay or receive funding every eight hours. On a multi-day hold that cost is real and belongs in the plan.
• Raising risk after losses. Doubling size to recover is the fastest documented route to zero.

Sizing when the stop is wide

The formula produces uncomfortable answers on volatile assets, and the discomfort is the point.

If the correct invalidation level sits 12% away, a $5,000 account risking 1% can buy $417 of that asset — which feels far too small to matter. The instinct is to move the stop closer so the position can be larger. That instinct is exactly backwards: it converts a well-placed stop into one that noise will hit, and turns a considered trade into a coin flip.

Risk per trade versus risk across the book

One percent per trade is a rule about a single position. It says nothing about what happens when five positions are open simultaneously in correlated assets.

Five positions at 1% each, in coins that move together, is a 5% risk on one underlying view. Our portfolio X-ray calculates how many genuinely independent bets you hold, and the answer is usually between one and two.

Two additional limits fix this:

1. Total open risk cap. No more than 3–5% of the account at risk across all positions at once.
2. Correlation adjustment. If two positions move together, treat them as one for sizing purposes.

Scaling in and out

Nothing requires the whole position to be entered at once, and partial entries change the arithmetic in a useful way.

Scaling in means entering a third at your level and adding as the idea is confirmed. Your average entry is worse, but total risk is smaller if the first entry fails immediately — which is when most failures happen.

Scaling out means taking part of the position at a first target and moving the stop to break-even on the rest. This converts an uncertain trade into a free one, and it is why traders with modest win rates still finish ahead.

The mistakes that repeat, in order of cost

1. Sizing first, stop second. The stop lands wherever the position allows, which is never where the idea is invalidated.
2. Risking a fixed dollar amount regardless of stop distance. This produces enormous positions on tight stops and tiny ones on wide stops — precisely inverted.
3. Increasing risk after losses. The fastest documented route to zero.
4. Increasing risk after wins. A streak is variance, not improved skill, and sizing up after four winners puts your largest position where your judgment is least calibrated.
5. Ignoring correlation. Believing five positions is five bets.
6. Forgetting fees and funding. On short-horizon trades, costs can consume a meaningful share of the intended risk.

Making it automatic

The calculation takes fifteen seconds and is skipped precisely when it matters most — during fast markets and after losses. Three habits remove the decision:

• Fix the risk percentage once and change it only after reviewing fifty trades, never after four.
• Calculate before the chart tempts you. Stop first, size second, entry third.
• Record the intended size in the journal alongside the actual one. The gap between them is a measurable form of discipline, and it usually widens exactly when results are worst.

Common questions

Should risk per trade change with confidence?

In theory a stronger setup justifies more size. In practice, confidence is poorly correlated with outcome and highest precisely when a streak has distorted judgment. Fixed risk is the safer default until fifty journaled trades say otherwise.

What if my exchange has a minimum order size?

Then that market is too large for your account at correct sizing. Trade a different pair or a venue with smaller minimums — do not oversize to meet a minimum.

Does position sizing apply to long-term spot holdings?

Differently. Without a stop there is no distance to size from, so the limit becomes what share of your net worth that asset represents. The principle survives: decide the maximum acceptable loss before buying.

The short version

Decide where you are wrong. Measure the distance. Risk one percent of the account across that distance. Check that liquidation sits at least twice as far away as your stop. Then place the trade, or do not place it at all.