What the numbers mean
Position sizing can't turn a losing method into a winning one, but it decides how long your money lasts and how much a bad day costs. Risking a fixed percentage means stakes fall after losses and rise only after gains.
Losing runs are normal even with a decent win rate. The run probability shows how often a trading day will include enough losses in a row to reach your daily limit.
The maths
- Stake = balance × risk per trade
- Losses before the daily limit = daily limit ÷ risk per trade
- Losses to halve the balance = ln(0.5) ÷ ln(1 − risk per trade)
- Average result per day = trades × stake × (win rate × payout − (1 − win rate))
Worked example
A $500 balance with 2% risk per trade means a $10 stake. A 10% daily limit ($50) is reached after 5 losses in a row, and 35 straight losses would cut the balance in half.
Habits that protect your balance
- 1Risk a small, fixed slice of the balance per trade; 1–2% is a common maximum.
- 2Set a daily loss limit and stop for the day when you reach it.
- 3Never raise the stake to win back what you lost.
- 4Take profits out regularly instead of leaving everything at risk.
- 5Log every trade so you know your true win rate.
Quick answers
How much should each trade be?
A common rule is 1–2% of the balance at most. With 500 in the account that means 5 to 10 per trade.
What daily loss limit makes sense?
Many traders stop after losing 5–10% of the balance in a day, before frustration pushes stakes up.
Can position sizing make binary options profitable?
No. It controls risk and how long the balance lasts; only a win rate above break-even makes the average result positive.