Fixed vs. Percentage Sizing: How to Choose Your Lot

There are two basic approaches to position size: a fixed volume and a percentage of the account. The choice between them affects how the account grows and how it weathers drawdowns. Let's go through both, their pros and cons, and why percentage sizing is preferable for most people.

Fixed volume

With fixed sizing you always trade the same lot, for example 0.1. It is simple and predictable, convenient for a beginner learning the mechanics. But the downside is significant: the risk as a percentage floats. As the account grows, a fixed lot risks an ever-smaller percentage (underusing capital), and after a drawdown, on the contrary, too large a one (the percentage risk rises as the account shrinks). Risk management comes out sloppy: you risk a different percentage depending on the state of the account.

Percentage sizing

With percentage sizing, the volume is calculated from the current account for a fixed risk percentage (for example, 1%). The account grows, the lot grows; it falls, the lot shrinks. This is mathematically smoother: the percentage risk stays constant regardless of account size. Compounding works for you on the way up (as the account grows, so does absolute profit), and in a drawdown the size automatically shrinks, softening the fall more gently. Percentage sizing keeps risk at the set level by itself.

How each shapes the curve

Fixed volume gives linear growth and a linear drawdown in money, but a floating percentage risk. Percentage sizing gives exponential growth (compounding) and a self-slowing drawdown (as the account falls, the size shrinks, reducing further losses in money). In a drawdown percentage sizing is gentler: each subsequent loss is smaller in money because it is calculated from a reduced account. This makes deep drawdowns a little less destructive.

What to choose

Percentage sizing is usually preferable: it keeps risk under control automatically and harnesses compounding. Fixed sizing is simpler for starting out and drilling the mechanics while you are still mastering the calculation. The main thing is not to confuse reinvesting with ramping up risk: increase size as your capital grows (which percentage sizing does automatically), not in the hope of 'recouping faster' from a drawdown by raising the percentage. Ramping up risk to speed things up is a direct path to a blown account.

The practical takeaway

Fixed sizing (always the same lot) is simple, but the percentage risk floats: less as the account grows, more in a drawdown. Percentage sizing (volume from the current account for a fixed percentage) keeps risk constant, harnesses compounding on the way up, and brakes more gently in a drawdown (the size shrinks automatically). For most people percentage sizing is preferable; it controls risk automatically. Fixed sizing is handy for starting out and drilling the mechanics. Don't confuse reinvesting with ramping up risk: grow the size as your capital grows, not to win back a drawdown. Understanding the difference between the two sizing methods helps you choose the approach that keeps risk under control and supports steady account growth.

This material is for educational purposes and is not individual investment advice.