Position sizing on a funded or evaluation account should be driven by the firm's drawdown rules first, and by personal risk preference second — the opposite order of priority from a typical personal trading account. This article walks through a simple, repeatable calculation.
The core formula
Start from the smaller of two numbers: your remaining daily loss allowance, and your remaining distance to the maximum drawdown floor. Whichever is smaller becomes your effective risk budget for the next trade.
Worked example
| Input | Value |
|---|---|
| Account size | $100,000 |
| Daily loss limit | 5% ($5,000) |
| Already lost today | $1,500 |
| Remaining daily allowance | $3,500 |
| Maximum drawdown floor | 10% from peak equity ($10,000 total room, $6,000 already used) |
| Remaining drawdown room | $4,000 |
| Effective risk budget (smaller of the two) | $3,500 |
| Target risk per trade (1% of account) | $1,000 |
In this example, because $1,000 (the intended per-trade risk) is comfortably below the $3,500 effective budget, the trade can proceed at the originally planned size. The calculation becomes protective on days where the effective budget shrinks below the trader's normal per-trade risk — that's the signal to cut size, not increase it to "catch up."
Converting dollar risk into lot or contract size
Once you know the dollar amount you're willing to risk on a trade, divide it by the dollar value of your stop-loss distance per lot or contract. For forex, this means calculating pip value for your chosen lot size; for futures, it means using the exchange's published tick value per contract. Recalculating this for every trade — rather than using a fixed lot size regardless of stop distance — keeps risk consistent even as stop distances vary between setups.
Common sizing mistakes on funded accounts
- Using the same fixed lot size across trades with very different stop-loss distances.
- Recalculating risk against the full daily loss limit instead of the remaining allowance after earlier losses that day.
- Forgetting that floating losses on open positions may already be eating into the daily limit before a new trade is even placed.
- Not adjusting size downward as a trailing maximum drawdown floor rises after a profitable run.
Building this into a pre-trade routine
A short, repeatable pre-trade checklist — check remaining daily allowance, check remaining drawdown room, calculate the smaller effective budget, size the trade against it — takes under a minute once practiced and removes the guesswork that leads to oversized, rule-breaching trades under pressure.
- Should position sizing be different on a funded (live) account versus the evaluation?
- The same disciplined approach generally applies to both, since drawdown rules on funded accounts are often similar to, or stricter than, the evaluation phase.
- Is a fixed percentage risk per trade always appropriate?
- It's a reasonable starting default, but should be adjusted downward as your effective risk budget shrinks on a difficult day, rather than kept constant regardless of remaining room.
