The number of lots or units traded in a single position. Correct position sizing ensures each trade risks a consistent percentage of the account.
Position size is calculated using the formula: Lots = (Account × Risk%) / (Stop Loss in Pips × Pip Value). For a $100K account risking 1% with a 25 pip stop on EUR/USD: (100,000 × 0.01) / (25 × 10) = 4.0 standard lots. In prop trading, position sizing is more critical than in personal accounts because of strict drawdown limits. A single oversized position can breach daily DD limits and end your challenge immediately.