Fixed fractional position sizing is a widely used money management strategy where a trader risks a fixed percentage of their account balance on each trade. This approach dynamically adjusts the position size based on the account’s current value, helping traders control risk, manage drawdowns, and compound growth steadily.

Fixed fractional position sizing is a core technique for professional traders who prioritise account protection and sustainable long-term performance.

What is Fixed Fractional Position Sizing?

Fixed fractional position sizing means risking the same percentage of your account balance on every trade, regardless of how much the account grows or shrinks.

Common risk percentages:

• Aggressive: 2–3% risk per trade
• Moderate: 1–2% risk per trade
• Conservative: 0.5–1% risk per trade

As your account grows, your position size increases. If your account shrinks, your position size decreases. This self-adjusting method ensures that you never risk too much relative to your available capital.

How to Use Fixed Fractional Position Sizing

Step 1: Choose Your Risk Percentage
Decide how much of your account you are willing to risk per trade. For most traders, 1% or 2% is ideal.

Step 2: Calculate Dollar Risk per Trade
Multiply your account balance by the risk percentage.

Example:

• Account balance = £10,000
• Risk = 2%
• Risk per trade = £200

Step 3: Calculate Position Size
Divide your dollar risk by the trade’s stop loss in pips, points, or monetary units.

Example:

• Stop loss = 50 pips
• £200 ÷ 50 pips = £4 per pip
• Determine lot size based on this value.

Step 4: Adjust Dynamically
As your account grows or shrinks, recalculate the position size for each trade.

Advantages of Fixed Fractional Position Sizing

1. Protects Capital During Drawdowns
Position size shrinks automatically after losing streaks, reducing further damage.

2. Compounds Gains Steadily
Position size increases with account growth, accelerating returns safely.

3. Simple and Consistent
Once set, the rule is easy to apply consistently.

4. Supports Psychological Stability
Fixed risk levels prevent emotional overreactions to wins or losses.

5. Suitable for All Trading Styles
Works well for scalpers, day traders, swing traders, and investors.

Challenges of Fixed Fractional Position Sizing

Slow Recovery from Drawdowns
Since risk per trade decreases after losses, it can take time to recover.

Risk Percentage Must Be Sensible
Too high a percentage risks rapid account depletion.

Requires Accurate Stop Loss Placement
The strategy assumes stop losses are based on logical technical analysis.

Emotion May Tempt Deviations
Traders may feel tempted to increase risk during losing streaks or after big wins.

Simple Example of Fixed Fractional Position Sizing

Account Balance	Risk % per Trade	Risk Amount	Example Stop Loss	Position Size Calculation
£10,000	2%	£200	50 pips	£4 per pip (0.40 lots on EUR/USD)
£8,000	2%	£160	50 pips	£3.20 per pip (0.32 lots)
£12,000	2%	£240	50 pips	£4.80 per pip (0.48 lots)

Position sizes adapt automatically as the account grows or shrinks.

Best Practices for Fixed Fractional Position Sizing

• Risk Only 1–2% per Trade:
  Lower percentages protect against long losing streaks.
• Recalculate Before Every Trade:
  Always base position size on current account balance.
• Combine with Smart Stop Loss Placement:
  Stops should be based on technical structure, not random distances.
• Stay Disciplined:
  Never adjust risk emotionally after wins or losses.
• Track in Your Trade Journal:
  Record risk percentages and position sizes to monitor consistency.

Common Fixed Fractional Mistakes to Avoid

Mistake	How to Overcome
Risking too high a percentage	Stick to 1–2% maximum risk per trade.
Ignoring changes in account balance	Recalculate risk amount regularly.
Using arbitrary stop losses	Set stops based on logical technical analysis.
Overtrading after losses	Maintain consistent risk no matter how you feel.

Avoiding these mistakes strengthens risk control and trading discipline.

Examples of Fixed Fractional Position Sizing in Practice

• Forex Swing Trader:
  • Risks 1.5% of account per trade.
  • Trades fewer but larger pip moves with tight discipline.
• Futures Day Trader:
  • Risks 1% of account per trade.
  • Adjusts position size daily based on closing account balance.

Both maintain steady risk management and let their accounts grow consistently over time.

Conclusion

In trading, consistency beats flashes of brilliance. A disciplined fixed fractional position sizing strategy controls risk, protects capital, and compounds growth intelligently. By risking only a fixed, manageable portion of your account on each trade, you build the professional foundation needed for long-term trading success.

If you are ready to master risk management, control your trading outcomes, and develop strategies used by top traders, explore our Trading Courses and start building a safer, smarter trading career today.