Fixed fractional sizing risks a set percentage of your current balance each trade, so the dollar risk moves with the account. Fixed risk, or fixed dollar, sizing risks the same amount every trade no matter the balance. Both are valid; they just behave very differently through winning and losing runs.
Fixed fractional (percentage of balance)
You risk, say, one percent of whatever the account is worth today. As the balance grows, the dollar risk grows with it, so profits compound automatically. As the balance falls in a drawdown, the dollar risk shrinks, so each loss is smaller than the last. This is the method behind the one percent risk rule.
Fixed risk (same dollars every trade)
You risk a flat amount - $100 a trade, for example - regardless of whether the account is at $8,000 or $12,000. It is simpler to track and keeps every loss identical in size, but it does not compound gains and it does not ease off during a losing streak.
The gap looks small over five trades, but across a long drawdown the fixed fractional method keeps trimming risk while fixed dollar keeps taking full-size hits - which is why percentage sizing tends to produce shallower drawdowns.
Which should you use?
- Fixed fractional - the default for most traders and long-term growth, because it compounds and self-protects in drawdowns.
- Fixed dollar - fine for very small accounts, short test windows, or traders who want dead-simple bookkeeping.
Important: whichever you choose, the position size must still be derived from your stop distance. The percentage or dollar amount only sets how much you risk; the stop still decides the lot.
What the measured data says
The choice between the two methods matters far less than the number you put in front of it. We ran a Monte Carlo simulation of fixed-fractional sizing over 500 trades to find the probability of a 50% account drawdown at each risk level. Risk per trade dominates every other variable in the table.
| Risk : reward | Win rate | Edge per trade | 0.5% | 1% | 2% | 3% | 5% | 10% |
|---|---|---|---|---|---|---|---|---|
| 1 : 1 | 40% | -0.20R | 4.81 | 94.96 | 99.96 | 100 | 100 | 100 |
| 1 : 1 | 50% | 0.00R | <0.01 | 0.24 | 16.0 | 39.98 | 70.47 | 94.08 |
| 1 : 1 | 60% | +0.20R | <0.01 | <0.01 | 0.01 | 0.03 | 0.64 | 10.15 |
| 1 : 2 | 40% | +0.20R | <0.01 | <0.01 | 0.22 | 1.8 | 11.62 | 46.2 |
| 1 : 2 | 50% | +0.50R | <0.01 | <0.01 | <0.01 | 0.02 | 0.21 | 5.4 |
| 1 : 3 | 50% | +1.00R | <0.01 | <0.01 | <0.01 | 0.01 | 0.03 | 1.75 |
Follow the second row across. A breakeven system at 1:1 has essentially no chance of a 50% drawdown at 0.5% risk, a 16% chance at 2%, and a 94% chance at 10% - same system, same win rate, same edge. Nothing about the entry changed; only the fraction did. That is the practical case for fixed fractional over fixed dollars: the percentage is the variable that decides survival, so it is the one you want held constant rather than drifting as the balance moves.
The fourth row is the other half of the story. A 40% win rate at 1:2 is profitable (+0.20R per trade) and still carries a 46% chance of halving the account at 10% risk. A positive edge does not protect you from a sizing mistake - it only decides where you end up if you survive long enough to collect it. Both methods are safe at 1% and both are dangerous at 10%; picking between them is a second-order decision. The full grid across every win rate and risk-reward combination is in the risk of ruin study, and the position size calculator converts whichever percentage you settle on into a lot size.
Compare them on your own data
The difference between these methods is easiest to see, not read. Run the same set of trades in a backtesting simulator under each sizing rule and compare the two equity curves. You will feel immediately why compounding a percentage of a growing balance, and shrinking risk into a falling one, changes the whole shape of your results.
Position sizing method FAQ
What is the difference between fixed fractional and fixed risk sizing?
Fixed fractional risks a percentage of the current balance, so dollar risk moves with the account. Fixed risk risks the same dollars every trade. The first compounds; the second stays steady.
Which position sizing method is better?
Fixed fractional usually wins for long-term growth because it compounds and shrinks risk in drawdowns. Fixed dollar is simpler and can suit small accounts. Most traders use fixed fractional at about one percent.
Does fixed fractional sizing reduce drawdowns?
Yes. Each loss is a percentage of a shrinking balance, so losses get smaller during a drawdown. Fixed dollar keeps taking the same-size loss, so drawdowns can deepen faster.