Size the risk before the position

Begin with the scenario

Position sizing starts by defining a monetary risk budget and the price movement at which the trade idea would be invalidated. CME’s educational framework links size to the chosen stop and the amount put at risk. The arithmetic is a planning tool, not a reason to select an arbitrary stop or to use all available margin. The instrument’s units and contract multiplier must be understood first.

A simple ounce-based example

Suppose an entirely hypothetical position has a $100 risk budget and a $0.50-per-troy-ounce distance between entry and planned exit. Ignoring costs and assuming execution at that exit, the calculation is $100 ÷ $0.50 = 200 troy ounces. That is a quantity of metal exposure, not 200 futures contracts and not a statement about the cash deposit needed to open the position.

Allow for frictions and increments

With an illustrative $0.10 per ounce allowance for transaction costs and slippage, the same budget permits $100 ÷ $0.60 = 166.67 ounces before rounding down to the permitted increment. Real costs can include fixed as well as variable charges. Standardised contracts may make the calculated exposure unavailable; one must apply the actual multiplier and minimum size rather than round up and quietly exceed the planned budget.

A stop is not a loss ceiling

Order rules differ by venue and broker. Triggered stops may seek execution at available prices, while stop-limit or protected orders can remain partly or wholly unfilled when their price constraints prevent execution. Gaps and thin liquidity can make the realised outcome worse than the planning assumption. The quantity calculation therefore estimates a scenario; it does not insure it. Review the instrument’s order mechanics alongside the arithmetic before interpreting any risk figure.

FOLLOW THE EVIDENCE

Sources & further reading

Sources checked 14 November 2026. Reference organisations do not endorse this website. Price examples are hypothetical and educational.