Fixed-fractional position sizing is one of the oldest and steadiest answers to the question every trader has to settle: how much to put on each trade. The rule is simple to state — risk the same small fraction of your account on every trade — and its consequences are worth understanding, because they shape how an account grows and how it survives a bad run.
The rule in one sentence
Decide a fraction of the account you are willing to lose on a single trade — say, a small percentage — and risk exactly that on each trade, recalculated against the current balance. Because the fraction is fixed but the balance moves, the dollar amount at risk rises after wins and falls after losses, automatically.
Why the size follows the balance
This is the quiet power of the method. After a winning streak, the account is larger, so the same fraction is a larger position — you press a working edge without changing the rule. After a losing streak, the account is smaller, so the same fraction is a smaller position — you de-risk into weakness without a discretionary decision. The sizing breathes with the account on its own.
Turning a fraction into an order size
The fraction sets how much you can lose, not how large the order is. To get from one to the other you need the stop distance: the gap between entry and the price at which the trade is wrong. Dividing the dollars at risk by the per-unit loss at the stop gives the position size. This is exactly the calculation behind how a stop and position sizing work together — the stop and the fraction jointly fix the size.
Where it needs guardrails
Fixed-fractional sizing is not a complete risk policy by itself. A run of correlated losses can still hurt even when each trade is small, and a very small account can hit minimum order sizes that distort the math. That is why it sits inside a wider policy with a daily loss limit and a defined drawdown threshold rather than standing alone.
For the deeper picture of how losses compound and what it takes to recover, read about setting a maximum-drawdown threshold. Fixed-fractional sizing keeps any single trade survivable; the rest of the policy keeps a bad sequence survivable too.