Position Sizing

Position sizing determines how much capital to allocate to each trade. In Gordon, this is where risk is actually controlled — not through leverage.

Leverage Is Not Risk

This is the most common misconception in crypto trading. Leverage is a margin efficiency tool, not a risk multiplier.

Consider two traders with $10,000 accounts:

	Trader A (2x leverage)	Trader B (10x leverage)
Position size	$20,000	$100,000
Stop loss	5% from entry	1% from entry
Max loss	$1,000 (10% of account)	$1,000 (10% of account)

Both risk the same amount. The difference is how far the stop loss is from entry. Higher leverage with tighter stops can have the exact same risk as lower leverage with wider stops.

Gordon's Position Sizing Formula

Quantity = (Account × Risk%) / |Entry - StopLoss|

Where:

• Account = total account balance ($5-10k)
• Risk% = maximum loss per trade as a percentage of account (typically 5%)
• Entry = entry price
• StopLoss = stop loss price (strategy-specific)

The leverage is then derived, not chosen:

Leverage = Position Value / Account Balance

Volatility Targeting

Raw position sizing doesn't account for market conditions. A $500 risk in a calm market produces very different outcomes than $500 risk in a volatile market.

Volatility targeting adjusts position size based on current market volatility:

Scale Factor = Target Volatility / Realized Volatility

• When volatility is low: scale factor > 1 (take larger positions)
• When volatility is high: scale factor < 1 (reduce exposure)
• Scale factor is capped at 2.0 to prevent excessive sizing

This means Gordon trades more aggressively in calm markets and more conservatively in volatile ones.

Cross Margin

Gordon uses cross margin exclusively — the full account balance serves as margin for all positions. This provides:

• Maximum margin buffer before liquidation
• No per-position margin isolation (deliberate — the account is the risk unit)
• Simpler risk management (one account, one drawdown limit)

Why This Matters

Most retail traders blow up not because their strategy is bad, but because they size positions incorrectly:

• Too large — a normal drawdown wipes out the account
• Too small — the strategy can't compound meaningfully
• Inconsistent — random sizing destroys the statistical edge

Gordon's approach ensures every trade risks a consistent, controlled percentage of the account, regardless of the asset, timeframe, or market conditions.