Deciding how large a trade to take so that a loss costs only a fixed, small percentage of your account.
Position size is calculated from three things: your account risk (e.g. 1% of the account), the distance to your stop-loss, and the value per pip/point. Size = risk amount ÷ (stop distance × value per unit). It is derived from the stop, never a fixed lot.
Correct sizing keeps any single loss survivable and makes results consistent — the same 1% risk whether the stop is tight or wide. It is what keeps a losing streak from ending the account.
Set the percentage you will risk per trade first, place your stop based on the chart (not on the size you want), then compute the size that makes that stop equal your chosen risk.
Never widen risk to chase a bigger position, and account for spread, slippage and correlated trades. Sizing is mechanical — it should never be overridden on a 'sure thing'.
Reading a definition is step one. Chart Bound drills you on spotting Position Sizing and dozens of other setups on live candles, and the Daily gives you one fresh chart to read every day. Free to start.