Position size
Definition
Position size is the amount of a single trade, computed so that its loss never exceeds a share of the deposit you set in advance. In binary options a loss takes the whole trade amount, so position size equals the risk here: 2% risk on a $1,000 deposit means a $20 trade.
What sets the trade size
Position size is not computed from "how much I want to make" but the other way round: from how much may be lost. First you set the share of the deposit you can afford to hand over in a single trade, and only then does that turn into an amount. The size obeys the risk, not the reverse — that is what separates money management from trading by feel.
In binary options the calculation is shorter than on other markets. The trade closes automatically at expiration, and a wrong call loses the whole amount staked. So the risk per trade is the trade amount: 2% of $1,000 is $20, and there is no stop-loss here that could trim that loss.
What inflated risk costs
A $1,000 deposit, the amount computed from the current balance, losses coming in a row:
| Risk per trade | First trade | After 5 losses | After 10 losses |
|---|---|---|---|
| 1% | $10.00 | $950.99 (−4.9%) | $904.38 (−9.6%) |
| 2% | $20.00 | $903.92 (−9.6%) | $817.07 (−18.3%) |
| 5% | $50.00 | $773.78 (−22.6%) | $598.74 (−40.1%) |
| 10% | $100.00 | $590.49 (−41.0%) | $348.68 (−65.1%) |
The gap between 2% and 10% is not "five times more aggressive". Ten losses in a row at 2% leave the account fully workable; at 10% they turn $1,000 into $349, and getting back means nearly tripling what is left. A streak of ten losses at a 55% win rate is not a rare event — over a couple of hundred trades it happens regularly.
Putting it to work
You can compute the amount for your own deposit and risk with the position size calculator — it also shows what is left of the account after a streak of losses and puts several risk levels side by side. If the calculation comes out below the broker's minimum trade, that is a signal to lower the risk or grow the deposit rather than round up: rounding up on a small account quietly turns 2% into 5–7%.
It is worth looking at drawdown separately: it explains why inflated risk is dangerous not for the loss itself but for how much has to be won back afterwards. Losing 41% takes almost 70% of growth just to return to zero.
How it differs from risk per trade
Formally these are two different quantities: risk per trade is a share of the deposit in percent, position size is an amount in money. You set the first one; the second comes out of the calculation.
In binary options they coincide numerically, because a loss takes the whole trade, and there is nothing to distinguish. On markets with a stop-loss the difference is fundamental: there, at the same 2% risk, position size changes from trade to trade because it depends on the distance to the stop. If you come to binary options from forex, the habit of computing these separately simply will not be needed here.
Frequently asked questions
What percent of the deposit should go into one trade?
Between 1 and 2% — the standard that keeps an account alive through any streak of losses. At 2%, ten losses in a row take about 18% of the deposit and the account stays workable. At 10% the same streak leaves a third of it, and the problem is no longer the strategy.
Why does position size equal the risk in binary options?
Because the trade closes at expiration and a wrong call takes the whole amount staked — there is no partial loss. On forex, position size and risk are computed separately: the loss there is capped by a stop-loss, and the same position carries a different risk at a different stop distance.
Percent of the starting deposit or the current one?
The current one. Then, after a streak of losses, the trade size shrinks on its own and the drawdown stops accelerating — that is the whole point of a percentage approach. Measuring against the starting sum quietly raises the real share at risk exactly when you are down.