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What is Position Sizing in Trading?

Updated: Aug 30, 2021

In share market, only 'Entry' and 'Exit' decide the trade's fate, whether it is an intraday trade, BTST trade, or positional trade.

But Position Sizing decides the magnitude of that fate (profit or loss). Hence, position sizing is equally essential as compared to entry and exit of the trade.

Hence, financial analysts prioritize position sizing when they plan to buy some shares in any security.

van tharp position sizing model

What Is Position Sizing?

Position sizing refers to the size of a trading position within a particular portfolio.

It can also be defined as a number of shares (or lots) per trade or the amount that a trader will invest per trade.

The famous trader Van Tharp defines this as 'How big should I make my position for any trade?'

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