> ## Documentation Index
> Fetch the complete documentation index at: https://docs.trinigence.com/llms.txt
> Use this file to discover all available pages before exploring further.
# Position Sizing Basics
> How position sizing works in Trinigence and why it matters more than entry logic.
## Why position sizing matters
Position sizing defines **how much you risk per trade**.
Two strategies with identical entries and exits can have:
* completely different drawdowns
* completely different equity curves
* completely different survivability
Entry logic decides *when* you trade.\
Position sizing decides *whether you survive*.
***
## What position sizing is
Position sizing answers one question:
> How large is each position relative to my capital?
It controls:
* exposure per trade
* compounding behavior
* sensitivity to losses
* volatility of returns
***
## Common sizing approaches
### Fixed size
You trade the same nominal size every time.
Example:
```text theme={null}
Buy $1,000 worth of BTC on each trade.
```
Characteristics:
* simple
* no compounding
* PnL grows linearly
Use cases:
* early testing
* concept validation
***
### Percent of equity (most common)
You trade a percentage of your current equity.
Example:
```text theme={null}
Use 5% of equity per trade.
```
Characteristics:
* natural compounding
* drawdowns scale with account size
* most realistic for long-term testing
This is the default mental model most traders use.
***
### Risk-based sizing (advanced)
You size positions based on **risk per trade**, not position value.
Example:
```text theme={null}
Risk 1% of equity per trade based on stop loss distance.
```
This means:
* wider stop → smaller position
* tighter stop → larger position
Risk-based sizing requires clearly defined stop loss logic.
***
## Position sizing vs leverage
Leverage amplifies position size.
Key points:
* leverage increases both gains and losses
* leverage does not change edge
* leverage increases liquidation risk
Best practice:
* define sizing first
* apply leverage only if you understand margin mechanics
***
## How sizing interacts with TP/SL
Sizing and exits are tightly coupled.
Example:
* risking 10% of equity with a 2% SL
* risking 2% of equity with a 10% SL
These are *not equivalent* in behavior.
Understand how exits and sizing interact.
***
## Why backtest returns can be misleading
High returns can come from:
* oversized positions
* aggressive compounding
* hidden leverage assumptions
Always inspect:
* drawdown
* largest loss
* exposure time
Learn which metrics reveal sizing risk.
***
## Defaults and assumptions
If position sizing is:
* explicitly defined → used exactly
* omitted → a safe default is applied and shown
* ambiguous → ATI asks for clarification
See how sizing assumptions are handled.
***
## Common mistakes
This often creates fragile strategies that fail under slippage or volatility.
Always normalize or align sizing before comparing performance.
High returns are meaningless if drawdowns are untradeable.
***
## Best practices
* Start with conservative sizing
* Risk a small % per trade (especially early)
* Keep sizing consistent when comparing strategies
* Let strategy edge, not leverage, drive performance
***
## What to read next
Position sizing inside the full risk layer.
How exits influence sizing impact.
Spot sizing-driven distortions.
Iterate risk safely.
Most strategies fail because of sizing, not signals.