The formula (it's simpler than you think)

I spent way too long making this complicated before I realized the whole thing boils down to one line of math. Here it is:

// The only formula you need
contracts = floor( dollarRisk / (stopPoints × dollarPerPoint) )

That's it. Three inputs, one output. Let me break each piece down so there's zero confusion.

dollarRisk is how much money you're willing to lose on this trade. You get it by taking your available drawdown and multiplying it by your risk percentage. If your drawdown is $3,000 and you're risking 1%, your dollar risk is $30.

stopPoints is the distance from your entry to your stop loss, measured in points. Not ticks -- points. If you enter MNQ at 18,500 and your stop is at 18,490, that's a 10-point stop.

dollarPerPoint is how much each point of movement costs you per contract. This is different for every instrument. MNQ is $0.50 per point. ES is $12.50. NQ is $5. I'll give you the full table in a second.

Walk-through example

Let's say you have a $3,000 drawdown and you want to risk 1% per trade. You're trading MNQ with a 10-point stop.

Six contracts of MNQ. If your stop gets hit, you lose $30, which is exactly 1% of your drawdown. That's the whole game. You decide how much pain you can take, and the formula tells you how many contracts fit inside that pain budget.

Key insight: The formula uses floor(), not round(). Always round down. If the math says 6.8 contracts, you trade 6. Never round up. I'll explain why later, but the short version is: rounding up is how you blow accounts.

The dollar-per-point table you need

This is the table I wish someone had given me when I started. Bookmark it. Tattoo it on your forearm. Whatever it takes.

Instrument $/Point Tick Size $/Tick
MNQ MICRO $0.50 0.25 $0.125
MES MICRO $1.25 0.25 $0.3125
MYM MICRO $0.50 1.00 $0.50
M2K MICRO $5.00 0.10 $0.50
MCL MICRO $10.00 0.01 $0.10
MBT MICRO $1.25 5.00 $6.25
NQ $5.00 0.25 $1.25
ES $12.50 0.25 $3.125
YM $5.00 1.00 $5.00
CL $10.00 0.01 $0.10

The column that matters most for position sizing is $/Point. That's the number you use in the formula. The tick size and tick value columns are there because people confuse "points" and "ticks" all the time -- they're not the same thing for most instruments.

Notice the jump between micro and full-size contracts. NQ moves $5 per point per contract. MNQ moves $0.50. That's a 10x difference. If you're on a $3,000 drawdown, the micros are where you should be living. One full NQ contract with a 10-point stop is $50 of risk. One MNQ with the same stop is $5. That flexibility is everything.

Why 1-2% risk is the sweet spot

Here's the math that changed how I trade.

If you risk 5% per trade, you can survive 20 consecutive losers before you blow your account. Sounds like a lot, right? It's not. A 50% win rate trader will hit a 7+ losing streak more often than you'd think. And those 20 losers don't have to be consecutive -- any combination of losses that adds up to 100% of your drawdown will do it.

At 10% risk per trade? Ten losers. That's nothing. I've had ten losers in a single morning when I was overtrading.

Now look at the other end. At 1% risk, you get 100 losers. Basically unkillable. At 2%, you get 50. Still very safe. The psychological difference between knowing you can survive 15 losers and knowing you can survive 80 is massive. It changes how you trade. You stop revenge-trading because one loss doesn't feel like an emergency.

I personally use 1% on accounts with intraday trailing drawdowns (because those are the tightest leash) and 1.5-2% on accounts with static or end-of-day drawdowns. The wider the drawdown type, the more breathing room you have. But I never go above 2%.

The mental game: Position sizing isn't just math. It's the foundation of your psychology. When you know that one bad trade costs you 1% of your drawdown, you can take the trade cleanly without hesitation. When you're risking 8%, every trade feels like life or death -- because it kind of is.

Common mistakes I see (and made)

I've been in enough trading Discords and blown enough of my own accounts to have a pretty solid list of ways traders screw up position sizing. Here are the big ones:

"I always trade 5 NQ"

This is the most common one. Traders pick a contract count and stick with it regardless of stop distance. But a 5-point stop and a 20-point stop are completely different trades. Five contracts of NQ with a 5-point stop is $125 of risk. The same five contracts with a 20-point stop is $500 of risk. You just quadrupled your exposure without realizing it. The formula adjusts for stop distance automatically -- that's the entire point.

Using the starting drawdown, not today's drawdown

Your drawdown shrinks as you lose. If you started with $3,000 but you've lost $800, your available drawdown is $2,200. Your position size should be based on $2,200, not $3,000. I see traders make this mistake all the time. They calculate their size on day one and never recalculate. Two weeks and $1,200 in losses later, they're still trading the same contract count -- but now they're risking 3% instead of 1%.

Ignoring drawdown type

Not all drawdowns work the same way. A $3,000 static drawdown and a $3,000 intraday trailing drawdown are completely different beasts. Trailing drawdowns follow your equity high, which means your cushion can shrink even on profitable days if you give back gains. Static drawdowns are fixed from your starting balance and don't trail.

If you don't understand the difference, read my full breakdown: What is drawdown in prop trading? It matters more than most traders realize.

Rounding up instead of down

Always floor. Never round up. If the formula says 4.7 contracts, you trade 4. Not 5. Rounding up means you're risking more than your target percentage on every single trade. Over hundreds of trades, that adds up fast. It's the difference between a 1% risk plan and a 1.3% risk plan. Doesn't sound like much, but it means you blow your account 30% faster than planned.

I made this mistake for months. I'd see 4.7 and think "eh, close enough to 5." It's not close enough. The floor function exists for a reason. Use it.

The blow counter -- my favorite sanity check

This is a concept I built into FundedSizer that I use every single morning before I trade. One division:

// How many losers can you survive?
blowCount = floor( availableDrawdown / riskPerTrade )

It tells you how many consecutive losers at your current risk level will kill your account. And I color-code it:

If I sit down to trade and my blow count is 8, I'm not trading that account until I adjust something. Either I drop to 0.5% risk, or I switch to a tighter stop setup, or I skip that account for the day. No ego. No exceptions.

In my experience, most traders who blow accounts have a blow count under 10 and don't know it. They think they're being conservative because they're "only risking 2%." But 2% on a $1,500 trailing drawdown that's already eroded to $900? That's a blow count of 5. You're gambling.

Multiple accounts change the math

If you're running one funded account, the formula above is all you need. But most prop traders I know -- myself included -- are running 3, 5, sometimes 10+ accounts at the same time. And that changes things.

The naive approach is to trade the same number of contracts on every account. But that doesn't work because your drawdowns are different. One account might have $2,500 of breathing room. Another might be down to $800. Putting the same position on both is reckless.

What you want is proportional allocation. Each account gets a number of contracts proportional to its available drawdown relative to the total pool. The account with more room gets more contracts. The account that's on thin ice gets fewer (or none).

This is honestly the main reason I built FundedSizer. Doing this math by hand for 6+ accounts every morning before the 9:30 open was eating 15 minutes I didn't have. The calculator does it in about 3 seconds. You add your accounts, set your risk, pick your instrument and stop distance, and it distributes contracts across all accounts proportionally. It even handles firm-specific max contract limits so you don't accidentally over-allocate.

Pro tip: When you run multiple accounts, look at the pool-level blow count, not just individual accounts. Your worst-performing account might have a blow count of 6, but if your pool-level blow count is 35, the pool as a whole is healthy. The weak account just needs less allocation. The full calculator shows both views.

Stop guessing. Do the math.

Position sizing isn't sexy. Nobody posts about it on Twitter. You'll never see a YouTube thumbnail that says "THIS POSITION SIZING FORMULA CHANGED MY LIFE" with a shocked face. But it's the single most important thing separating traders who survive from traders who don't.

I lost $4,500 in one morning because I didn't do this math. I haven't blown an account since I started doing it. That's not because I became a better trader. My win rate is still mediocre. My entries are still mid. But I size correctly, and correct sizing turns a mediocre edge into a sustainable one.

Do the math. Every time. Before every trade. Or better yet, let the calculator do it for you.

Do the math before the bell

Same formula from this post, but it does the work for you. Drawdown in, contracts out. No spreadsheet required.

Quick contract count Size all my accounts

Related: What is drawdown? · Stop blowing accounts · Expectancy calculator