Position sizing refers to the portion of capital a trader commits to a single trade idea. Professional risk management frameworks recommend never risking more than 1 to 2 percent of total capital on an isolated position. The collapse of Archegos Capital in March 2021, with a declared portfolio of 36 billion dollars but actual exposure reaching approximately 160 billion dollars through total return swap contracts, illustrates the dangers of excessive leverage and concentrated positions kept non-transparent. This event caused over 10 billion dollars in combined losses for lending banks, with Credit Suisse alone absorbing approximately 5.5 billion dollars in losses. The fundamental rule remains: it is never the trade idea that ruins an account, but rather the size given to it.
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