Position Sizing
How many contracts to trade — based on math, not feel.
Position sizing answers one question: how many contracts can you trade while keeping risk acceptable? The formula starts with account risk, not with how confident you feel. Decide the maximum dollars you are willing to lose, then divide that by the dollar value of your stop distance.
If you risk $200 and your stop is worth $100 per contract, the correct size is two contracts or less. If the stop is worth $250 per contract, the trade is too large for that risk limit unless you reduce size or skip it. The market does not care that the setup looks good.
Proper sizing keeps one trade from damaging your account. It also lowers emotional pressure because the outcome is survivable. The goal is to be consistent enough to let your edge appear over many trades.