Key takeaways
Decide your dollar risk first. Contracts = dollar risk ÷ (stop in ticks × tick value). Round down, never up. If even one contract risks too much, use the micro or skip the trade. In a prop firm account, size from the drawdown, not the account size.
Most traders who blow up an account don't do it with one bad idea. They do it by trading too large for their account. Position sizing is the habit that keeps any single trade, or any losing streak, from doing serious damage. The method is simple arithmetic, and once you learn it you can apply it to any contract.
Key points
- Decide how much money you are willing to lose on a trade before you decide how many contracts to trade.
- A common guideline is to risk a small, fixed percentage of the account per trade, often 0.5% to 1%.
- Contracts = dollar risk ÷ (stop distance in ticks × tick value).
- Always round down. If one contract risks more than your limit, use a micro or skip the trade.
- Small risk per trade keeps losing streaks survivable.
- In a prop firm account, base risk on the maximum drawdown, not the nominal account size.
Start with risk, not size
Many traders decide how many contracts to trade first and then place a stop wherever the dollars feel comfortable. That puts the stop in the wrong place. The better order is:
- Find where your trade idea is proven wrong. That is your stop.
- Decide your dollar risk for the trade.
- Calculate how many contracts fit that risk with that stop.
A common rule is to risk a small, fixed percentage of the account, often 0.5% to 1%. This is a risk-control convention, not a guarantee of results.
The formula
Contracts = dollar risk ÷ (stop distance in ticks × tick value)
The part in brackets is your risk per contract. If you think in points, use stop distance in points × point value instead. Tick and point values are in Futures Contract Specs Explained.
Worked example 1: MNQ
Account: $25,000. Risk per trade: 1% = $250. You trade MNQ ($0.50 per tick, $2 per point) with a 40-point stop.
- 40 points = 160 ticks.
- Risk per contract = 160 × $0.50 = $80.
- Contracts = $250 ÷ $80 = 3.1, so trade 3 MNQ (risk $240).
On NQ, the same 40-point stop risks 40 × $20 = $800 per contract, more than your $250 limit. NQ isn't an option for this trade. This is why micros are useful.
Worked example 2: MES
Account: $25,000. Risk per trade: 0.5% = $125. You trade MES with an 8-point stop.
- Risk per contract = 8 × $5 = $40.
- Contracts = $125 ÷ $40 = 3.125, so trade 3 MES (risk $120).
One ES with the same stop would risk 8 × $50 = $400, more than three times your limit.
Worked example 3: crude oil
Account: $20,000. Risk per trade: 1% = $200. You want a $0.30 stop on crude oil.
- On CL: $0.30 = 30 ticks × $10 = $300 per contract. Too much for a $200 limit.
- On MCL: 30 ticks × $1 = $30 per contract. $200 ÷ $30 = 6.67, so trade 6 MCL (risk $180).
Why the percentage stays small
Losing streaks happen to every trader. Small risk keeps them survivable. Here is what ten losses in a row do to an account when you risk a fixed percentage of the current balance on each trade:
| Risk per trade | Balance left after 10 straight losses | Drawdown |
|---|---|---|
| 0.5% | 95.1% | about 4.9% |
| 1% | 90.4% | about 9.6% |
| 2% | 81.7% | about 18.3% |
| 5% | 59.9% | about 40.1% |
After a 40% drawdown, you need a 67% gain just to get back to where you started. After a 10% drawdown, you need about 11%.
Include costs and slippage
Your real loss on a stopped-out trade is the stop distance plus slippage plus commissions. If you trade 3 MNQ and expect one tick of slippage and $1.00 per side in costs, add 3 × ($0.50 + $2.00) = $7.50 to the $240 planned risk. Over hundreds of trades this adds up, so build a buffer into your dollar risk.
Prop firm accounts
In an evaluation, base risk on the maximum drawdown, not the nominal account size. A "50K" account with a $2,000 drawdown behaves like a $2,000 risk budget. For example, Topstep's help center lists a $2,000 Maximum Loss Limit on its 50K Trading Combine, and Tradeify lists a $2,000 end-of-day trailing drawdown on its 50K Growth evaluation.
Worked example: sizing inside a $2,000 drawdown
If you risk 10% of the drawdown per trade, that is $200. Ten straight losses would end the account. At 5% ($100), you could take twenty. With a 10-point MES stop ($50 per contract), $100 of risk is 2 MES. Firms also cap the number of contracts you can hold, so check both limits. Compare drawdown rules across firms on our prop firm rankings.
Rules of thumb
- Round down, never up.
- If one micro still risks too much, the stop is too wide for your account. Skip the trade.
- Don't widen your stop after entry to avoid a loss. That changes your risk without changing your size.
- Recalculate size whenever your account balance changes meaningfully.
Use our position size calculator and risk-reward calculator to run your own numbers.
Next lesson
The same stop can be too tight in one session and too wide in another. Continue with Futures Trading Sessions and When Markets Move.
Frequently asked questions
What percentage should I risk per trade?
Many traders use 0.5% to 1% of their account. The right figure depends on your strategy and tolerance for drawdowns, but smaller is safer while you are learning.
What if the formula gives less than one contract?
Switch to the micro version of the contract, tighten your setup if the stop is genuinely too wide, or skip the trade.
Should I size from margin?
No. Margin is the minimum to open a position. It says nothing about how much you can afford to lose.
Does position size change with volatility?
It should. When a market is moving more, stops are usually wider, so the same dollar risk means fewer contracts.
How do I size in a prop firm evaluation?
Treat the maximum drawdown as your account. Risk a small fraction of it per trade and respect the firm's contract limits.
Keep learning
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Educational content only, not investment advice. Futures trading involves substantial risk of loss.