Position Sizing & the Kelly Criterion

Two traders can take the exact same trades — one goes broke, one thrives. The difference is position size.

Even a strategy with a 60% win rate will eventually hit a 5+ trade losing streak. If each trade risks 20% of the account, that streak is fatal.

Professional rule of thumb: risk 1–2% of the account per trade. Options sellers often cap total portfolio risk at 5% at any time.