Position Sizing and the 2% Rule

The most important rule in trading isn't about picking winners — it's about limiting losses. Master the 2% rule and Kelly Criterion for optimal position sizing.

Key Takeaways

• 1.Never risk more than 1-2% of your portfolio on a single trade
• 2.Position size = (Portfolio × Risk %) / (Entry - Stop Loss)
• 3.The Kelly Criterion mathematically optimizes bet sizing
• 4.Consistent small losses are survivable; one large loss can be catastrophic