What Is Position Sizing?
Position sizing answers one question before every trade: "How much capital should I risk on this specific trade?" — not "how much can I invest," but "how much am I willing to lose if this trade goes wrong."
The 2% Rule
A widely used guideline: never risk more than 1–2% of your total trading capital on a single trade. If your account is ₹2,00,000, a 2% risk cap means you should not lose more than ₹4,000 if your stop-loss is hit.
This does NOT mean you invest only ₹4,000 in the trade — it means you size your position so that the distance between your entry and your stop-loss, multiplied by your quantity, equals roughly ₹4,000.