Position Size Calculation — The Correct Way to Use Stop-Loss

Want to know why so many people get liquidated? Actually, using the right formula can help you avoid it.

The core formula is simple: Position Size = Risk Amount ÷ Stop-Loss Percentage

Let's take BTC as an example. Suppose you have $10,000 in your account, and you decide to risk 1% per trade, which is $100. You are bullish at the $100,000 level, with a stop-loss set at $98,000.

Then, based on the formula: $100 ÷ 2% = What should the position size be? The calculated position size determines how much leverage you can use and how many contracts to buy.

It sounds very basic, right? But just this step can prevent 90% of liquidations. Most people do the opposite—they decide how much leverage to use first, then enter the trade, and as a result, they get wiped out during a pullback.