Size for a loss you can actually experience

The short answer

Position sizing connects a capital budget to a loss scenario. A stop-based calculation estimates notional exposure under an assumed exit. It does not make the assumption reliable. For spot positions in thin markets, the loss you can actually experience is the whole position plus costs.

The stop-based calculation

With capital B, a loss budget r as a percentage, and a planned stop distance s as a percentage:

R = B × r/100          planned loss budget
N = R / (s/100)        stop-based notional

Worked example: B = $1,000, r = 1%, s = 20%.

R = $10
N = $10 / 0.20 = $50

If the exit occurs exactly as assumed, the price loss is $10. If liquidity disappears, the token becomes unsellable, or the market gaps past your level, the loss can approach the full $50 plus costs.

Full-loss exposure is the second question

If your acceptable total loss is $10 regardless of whether a stop executes, then $50 of exposure conflicts with that limit. A full-loss-budget mode caps the position by the total-loss scenario instead:

maximum spot notional before costs = R

And if your stated budget is meant to include fixed costs, subtract them first. If the remaining available notional is not positive, the honest output is that the trade is not sizable within the budget, not a rounded-down number.

Always state which mode you are in. The same inputs produce $50 in one mode and $10 in the other, and the difference is entirely about which failure you are protecting against.

Correlation hides concentration

Five different tokens tied to one narrative can fail together. At 2% each, your realistic worst case is closer to 10% than 2%. Copying several wallets can produce the same concentration without any explicit decision, because followed traders often buy the same assets within the same hours.

Review exposure at two levels: per token, and per shared risk — narrative, chain, platform, launch venue, or anything else your positions have in common.

Costs belong in the figure

Fees increase loss exposure and are not covered by a stop. On small positions fixed costs can be a large share of the loss budget. If $2 of fixed cost sits against a $10 budget, one fifth of the budget is spent before the market does anything.

Common mistakes

• Treating a stop as a guarantee rather than an intention that requires a working route.
• Sizing from conviction rather than from a loss budget.
• Increasing size after a winning streak without any change in evidence quality.
• Ignoring the native-asset balance needed to exit.
• Producing a precise-looking number that depends on an exit which cannot occur.

What this cannot establish

Sizing arithmetic does not tell you whether the trade is good, and it does not reduce the probability of loss. It makes the risk estimate explicit enough to challenge. That is its whole function.

Checklist

• Which mode: planned-stop, or full-loss budget?
• Loss budget stated in currency, not feel
• Full-loss exposure written next to the stop-based figure
• Fixed and percentage costs included
• Shared-risk exposure across open positions reviewed
• Conditions for skipping written before entry