Two traders can take the same trade, with the same entry and the same stop, and have completely different outcomes because one traded one contract and the other traded five. Position sizing is how you make sure a losing trade costs what you planned, and no more.
The fixed-fractional formula
The most widely taught approach is fixed-fractional sizing: decide what fraction of your account you're willing to lose if the trade hits its stop, then work backward to the number of contracts.
- Dollar risk = account equity × risk percentage.
- Risk per contract = stop distance in ticks × tick value.
- Contracts = dollar risk ÷ risk per contract, always rounded down.
Notice what's not in the formula: margin, how confident you feel, and how much you'd like to make. Size comes from your stop and your risk limit.
First, understand ticks and tick value
Every futures contract moves in minimum increments called ticks, and each tick is worth a fixed dollar amount per contract. A few widely traded examples from CME Group contract specifications:
| Contract | Tick size | Tick value |
|---|---|---|
| E-mini S&P 500 (ES) | 0.25 index point | $12.50 |
| Micro E-mini S&P 500 (MES) | 0.25 index point | $1.25 |
| Crude Oil (CL) | $0.01 per barrel | $10.00 |
| Micro Crude Oil (MCL) | $0.01 per barrel | $1.00 |
| Gold (GC) | $0.10 per ounce | $10.00 |
Specs can change and vary between similar contracts, so always confirm them with the exchange or your broker before trading. Our tick value calculator does the math for you.
Worked example: stock index futures
Suppose a trader has a $25,000 account and a rule to risk 1% per trade. Their setup calls for a stop 8 index points from entry.
- Dollar risk: $25,000 × 1% = $250.
- Stop in ticks: 8 points ÷ 0.25 = 32 ticks.
- Risk per E-mini contract: 32 × $12.50 = $400. That's more than $250, so the E-mini size is zero contracts.
- Risk per Micro contract: 32 × $1.25 = $40. $250 ÷ $40 = 6.25, rounded down to 6 Micro contracts, risking about $240.
Zero is a valid answer
When the formula says zero, it's telling you something useful: this trade, with this stop, is too big for this account. That's exactly the trade that tends to blow up small accounts.
Second example: crude oil
Same $25,000 account, same 1% ($250) limit, but now a crude oil setup with a stop 30 cents away.
- Stop in ticks: $0.30 ÷ $0.01 = 30 ticks.
- Full-size CL: 30 × $10 = $300 per contract → zero contracts.
- Micro MCL: 30 × $1 = $30 per contract → $250 ÷ $30 = 8.3 → 8 contracts, risking about $240.
The trade idea is identical in both cases. Only the contract choice makes it fit the account. This is a big reason micro futures exist.
The stop comes first, then the size
A common mistake is to pick a size first and then squeeze the stop until the dollar risk "fits." That puts your stop where your wallet wants it, not where the trade idea is proven wrong. Decide where the stop belongs based on your setup, then let the formula set the size. If the size comes out too small to bother with, skip the trade.
A variation: sizing by volatility
Some traders base their stop distance on the market's recent volatility, for example a multiple of the average daily range, instead of on a chart level. The sizing formula stays the same; only the stop input changes. The effect is that in quieter markets the stop is closer and the position can be larger, and in wild markets the stop is wider and the position smaller. This keeps the dollar risk roughly constant even as conditions change, which is why volatility-based sizing is popular in trend following.
Choosing your risk percentage
The percentage in the formula is a personal decision, not a market fact. Smaller percentages make losing streaks easier to survive and mistakes cheaper while you learn. Many educators discuss figures around 1% or 2% for exactly that reason, but nothing says you must use them. Whatever you choose, write it in your trading plan and keep it fixed for a meaningful number of trades so you can judge results fairly.
Where position sizing falls short
- Slippage and gaps can make the actual loss larger than the planned loss. Some traders build in a buffer by sizing slightly below the formula.
- Commissions and fees add to every trade's cost, especially with many small contracts.
- Correlated positions add up. Two 1% trades in closely related markets can behave like one 2% trade.
- Margin still applies. Even a well-sized position needs enough margin, and brokers can raise requirements in volatile markets. See margin and leverage.
Position sizing won't make a poor approach profitable. What it does is keep any single mistake survivable, which gives you the time to learn. Pair it with the limits in risk management.
Before you trade
Futures are leveraged. A small price move can produce a large gain or loss, and losses can exceed the money in your account. This article is general education, not a recommendation to buy or sell any contract.
- Practice in a simulated (paper) account before using real money.
- Decide your maximum loss per trade before you enter, and size positions to it.
- Confirm current contract specifications and margin requirements with the exchange and your broker.
Common questions
What is fixed-fractional position sizing?
It means risking the same fraction of your account on each trade, such as 1%, and sizing the number of contracts so that a stop-out costs about that amount.
What if the formula says zero contracts?
Then the trade is too large for your account with that stop. You can skip it, use a smaller contract such as a micro, or find a setup with a closer logical stop. Widening your risk limit to fit the trade defeats the purpose.
Where do I find a contract's tick size and tick value?
On the exchange's contract specifications page, for example CME Group's, and in your broker's platform. Always confirm before trading because specs can differ between similar contracts.
Sources
- Trade and Risk Management — CME Group Education. www.cmegroup.com/education/courses/trade-and-risk-management.html
- A Trader's Guide to Futures — CME Group. www.cmegroup.com/education/brochures-and-handbooks/a-traders-guide-to-futures.html
- Futures Market Basics — U.S. Commodity Futures Trading Commission. www.cftc.gov/LearnandProtect/AdvisoriesAndArticles/FuturesMarketBasics/index.htm
Last reviewed October 17, 2026. Educational content only; not investment advice. Contract specifications and margins change, so confirm current figures with the exchange and your broker. See our risk disclosure.
