Understanding Position Size
Position size represents the total value of your exposure to an asset, not just the capital you've deposited. With leverage, your position size can be many times larger than your actual margin.
Calculation: Position Size = Margin × Leverage
Example: - Margin deposited: $1,000 - Leverage used: 10x - Position size: $10,000
Understanding position size is crucial because: - Profits and losses are calculated on position size - Funding fees apply to the full position size - Risk management should consider total exposure
Risk management principles for position sizing: - Never risk more than a small percentage of your portfolio per trade - Account for the maximum possible loss (to liquidation) - Consider correlation between positions - Factor in funding costs for longer holds
Many traders use the "1-2% rule"—risking no more than 1-2% of their total capital on any single trade. With high leverage, this means using much less than your maximum available margin.
For RWA perpetuals specifically, position sizing should account for: - Traditional market hours (gaps possible) - Weekend risk (markets closed but perps trade) - Correlation with other RWA positions - Historical volatility of the specific asset