How to Calculate Position Size for Futures Trading

I blew up my first trading account in three weeks.

Not because my setups were bad. Not because the market was against me. I just didn't know how many contracts to trade. So I guessed. And guessing doesn't work when you're risking real money.

Here's what nobody told me: position sizing isn't optional. It's the difference between staying in the game and blowing your account before you figure out what you're doing wrong.

Let me show you exactly how to calculate it.

The Formula (It's Simpler Than You Think)

Position sizing comes down to one question: how many contracts can I trade while risking only X% of my account?

Here's the formula:

That's it. Three inputs, one answer.

Let me break it down.

Dollar Risk = Your account size × risk percentage. If you have $25,000 and risk 2% per trade, that's $500.

Stop Distance = How many ticks between your entry and stop loss.

Tick Value = How much one tick is worth for your contract. This varies by instrument.

Still with me? Good. Let's run through a real example.

Real Example: Trading ES Futures

Say you're trading the E-mini S&P 500 (ES). Here's your situation:

• Account: $25,000
• Risk per trade: 2%
• Entry: 4,500.00
• Stop loss: 4,495.00
• ES tick value: $12.50 (each 0.25 point move)

Step 1: Calculate your dollar risk

$25,000 × 2% = $500

You're willing to lose $500 on this trade. Not a penny more.

Step 2: Calculate stop distance in ticks

Entry is 4,500. Stop is 4,495. That's 5 points.

Each point has 4 ticks (because ES moves in 0.25 increments).

5 points × 4 ticks = 20 ticks

Step 3: Apply the formula

$500 ÷ (20 ticks × $12.50) = $500 ÷ $250 = 2 contracts

That's your answer. Two contracts. Not three because you "feel good" about this setup. Not one because you're scared. Two.

Tick Values You Need to Know

Here's where traders mess up. Every futures contract has a different tick value. Use the wrong number and your math is useless.

Bookmark this. You'll need it.

Why Most Traders Skip This (And Pay For It)

Here's the thing.

You know you should calculate position size. So why don't you?

Because when you see a setup forming, you don't have time. You're watching price action, checking levels, managing emotions. The last thing you want is to pull out a calculator.

So you guess. "Probably two contracts." Or worse: "I'll just do what I did last time."

Ever entered five contracts when you meant to enter two? Ever watched a "small" loss turn into an account-crushing disaster because you sized too big?

That's not a trading problem. That's a math problem. And math problems have solutions.

The 1% vs 2% Rule: Which Should You Use?

New traders: start with 1%. Seriously.

At 1% risk per trade, you can lose 10 trades in a row and still have 90% of your account. That's enough runway to learn.

At 2%, you have less margin for error. But if you have a proven edge and solid win rate, 2% lets your winners compound faster.

Here's how the math plays out with a $10,000 account:

See the difference? At 1%, fifteen losing trades barely dent you. At 2%, you're down almost 30%.

Pick your risk level based on your experience, not your confidence.

Position Sizing for Small Accounts

Got a $5,000 account? The math still works. You just need the right instruments.

With $5,000 at 1% risk, your max loss per trade is $50. That's not enough for ES futures (one contract with a 4-tick stop already risks $50).

But micro futures change everything.

MES has a tick value of $1.25. MNQ is $0.50. Suddenly that $50 risk budget lets you trade 2-3 micro contracts with reasonable stop distances.

Small accounts aren't a disadvantage. They're a forcing function for proper risk management.

The Real Cost of Not Sizing Correctly

Let me tell you what happens when you skip position sizing.

You take a trade. It goes against you. No big deal, losses happen.

But because you oversized, that "normal" loss hits different. It's 5% of your account instead of 1%. Now you're emotional. Now you want to make it back.

So you size up on the next trade. "I need to recover." That one goes against you too. Now you're down 12%.

This is how accounts blow up. Not from one bad trade. From one bad trade followed by emotional decisions made without a plan.

Position sizing breaks this cycle. When every loss is 1%, no single trade can hurt you. You stay calm. You follow your process. You survive long enough to let your edge play out.

Automating the Calculation

I'm not going to pretend manual calculation is fun.

When I was doing this by hand, I'd have a spreadsheet open next to my charts. Entry price here, stop loss there, let me check the tick value, okay divide by... wait, the setup is gone.

That's why I eventually built a tool to do it for me. Click my entry. Click my stop. Get the exact contract size based on my risk settings.

If you're on NinjaTrader 8, you can check out SizeWise. It handles the math automatically so you can focus on the trade, not the calculator.

But honestly? Even a spreadsheet beats guessing. The method matters less than actually doing it.

Your Action Plan

Here's what to do next:

1. Decide your risk percentage. New trader? Start with 1%. Experienced? Consider 2%.
2. Know your tick values. Save that table above. Reference it before every trade.
3. Calculate before you enter. No exceptions. If you don't have time to calculate, you don't have time to trade.
4. Track your actual risk. After each trade, check: did you risk what you planned to risk? If not, figure out why.

Position sizing won't make you profitable. But it will keep you in the game long enough to become profitable.

That's the whole point.