Most trading mistakes aren't bad ideas — they're correct ideas sized so large that a normal, expected drawdown becomes unrecoverable. Position sizing is the discipline of deciding, before you enter, exactly how much of your account a single trade is allowed to put at risk.
A common starting framework is the 1% rule: risk no more than roughly 1% of total trading capital on any single position. That percentage doesn't set your position size directly — it interacts with your stop-loss distance. A trade with a stop 2% away from entry can support a larger position than one with a stop 10% away, for the same dollar risk.
The working formula is simple: position size = (account size × risk per trade) ÷ distance to your invalidation point. The invalidation point is the price at which your original thesis is wrong — not an arbitrary stop, but the level where the trade idea itself has failed.
Sizing this way removes a specific kind of emotional decision-making: you no longer decide how much to risk after watching a position move against you. The number is fixed before you click confirm, which is also why Quantiva's order preview surfaces required cash and downside context ahead of submission rather than after.