Position Sizing Formula Exposed | Mark Douglas Was Right
By Team Agora Circle
Written by the Agora Circle editorial team. Educational content, explained for the Indian market. Not investment advice.
Published 30 Mar 2026
Most traders obsess over strategy, indicators, and accuracy while ignoring the one calculation that decides whether an account survives or blows up: position sizing. Using a ten-lakh account and a fixed ten-thousand-rupee risk per trade, this video walks through the exact sizing formulas for cash, futures, and options. It makes a crucial distinction, that having the margin for five lots does not mean you should trade five lots, and shows how to define a stop loss on option premium so the position is structured correctly from the start. It also argues that a consistent one-to-two risk-reward beats chasing rare one-to-three setups, and lays out the few decisions every trader must make before entering. Echoing Mark Douglas, the theme is that you do not need to predict the next move to make money; you need to size and manage risk so that no single trade can take you out.
Key takeaways
- Most traders obsess over strategy and accuracy while ignoring the one calculation that decides survival: position sizing.
- Using a ten lakh account and a fixed ten thousand rupee risk per trade, the video walks through exact sizing formulas for cash, futures, and options.
- Having the margin for five lots does not mean you should trade five lots.
- Defining a stop loss on option premium structures the position correctly from the start.
- A consistent one to two risk reward beats chasing rare one to three setups.
- Echoing Mark Douglas, you do not need to predict the next move, you need to size and manage risk so no single trade can take you out.
Watch the full discussion
Frequently asked questions
How do I calculate position size?
Start from a fixed rupee risk per trade, for example ten thousand on a ten lakh account, then work back through your stop distance to the number of shares, lots, or option quantity that keeps the loss at that limit.
If my margin allows five lots, should I trade five lots?
No. Available margin is not a sizing signal. Position size should be set by your defined risk per trade and stop distance, not by the maximum the broker will let you take.
Is a bigger risk reward always better?
Not necessarily. A consistent one to two that you can actually execute repeatedly often beats chasing rare one to three setups, because reliability across many trades matters more than a few ideal ones.
This summary is for educational purposes only and is not financial, investment, or trading advice. Markets carry risk; do your own research and consult a qualified professional before making decisions.