Determine the right amount to allocate per trade.
Primary knowledge hub
Primary knowledge hub for platform usage and feature reference.
Position sizing determines how much capital to allocate to each individual trade. Proper position sizing ensures that no single trade can cause catastrophic losses, even if the trade goes against you.
The most common approach is to risk a fixed percentage of your allocation per trade (e.g., 1-2%). If your strategy has a $10,000 allocation and you set 1% risk per trade, the maximum loss per trade is $100. This method automatically adjusts position sizes as your balance changes.
The Kelly Criterion is a mathematical formula that determines the optimal position size based on your win rate and average win/loss ratio. While theoretically optimal, many traders use a fraction of the Kelly value (e.g., half-Kelly) to reduce volatility.
QuantumEdge enforces maximum position size limits server-side. Even if a strategy signal calls for a larger position, the platform will cap it at your configured maximum. This provides a safety net against strategy errors or unexpected market conditions.