One bet size shrinks with the account while another stays fixed and bites harder during drawdown
Delta-X Academy

Fixed-Fractional Versus Fixed-Dollar Sizing

Original Delta-X illustration.
free9 min read

Fixed-fractional sizing risks a constant percentage of current equity on each trade, so the bet shrinks after losses and grows after wins. Fixed-dollar sizing risks a constant cash amount regardless of equity. The first adapts to your balance; the second does not, which changes how each behaves through a drawdown.

Target audience: Traders choosing how to scale position size who have not compared the two methods' behaviour.

Learning objectives

  • ✓Define fixed-fractional and fixed-dollar sizing.
  • ✓Explain how each behaves through a drawdown.
  • ✓Describe why fixed-fractional cannot reach zero on a single losing track.
  • ✓Choose a method deliberately for its risk behaviour.

Definition

Fixed-fractional sizing risks a constant percentage of current equity on each trade, so the bet shrinks after losses and grows after wins. Fixed-dollar sizing risks a constant cash amount regardless of equity. The first adapts to your balance; the second does not, which changes how each behaves through a drawdown.

Why it matters

How you scale your bet to your equity decides how a losing streak compounds. Fixed-fractional sizing automatically reduces risk as the account falls, softening drawdowns and making a single track of losses unable to reach zero in theory. Fixed-dollar sizing keeps betting the same cash into a shrinking account, so the same streak does proportionally more damage. The choice is a core risk decision, not a detail.

Two ways to scale the bet

Fixed-fractional sizing risks the same percentage of your current equity every trade, so if you risk one percent and the account grows, the dollar bet grows with it, and if the account shrinks, the dollar bet shrinks too. Fixed-dollar sizing risks the same cash amount every trade, say five hundred dollars, no matter what the account is worth. On a flat account they behave similarly, but through a winning or losing run they diverge sharply, because one adapts the bet to the balance and the other holds it constant.

Behaviour through a drawdown

In a losing streak, fixed-fractional sizing automatically de-risks: each loss shrinks the equity, so the next bet is smaller, which cushions the fall and is why, in theory, a pure fixed-fractional track of losing trades approaches zero but never quite reaches it. Fixed-dollar sizing does the opposite by omission: it keeps risking the same cash into a smaller and smaller account, so that constant bet becomes a larger and larger percentage of what remains, accelerating the damage exactly when the account can least afford it.

Choosing for risk behaviour

Most systematic risk control uses fixed-fractional sizing precisely because of this self-correcting property: it ties your risk to your ability to bear it. Fixed-dollar sizing is simpler and can be fine for small, stable accounts or short horizons, but it removes the automatic protection just when it matters. Neither is universally right, but the choice should be made for how each behaves under stress, not by default. The important point is to understand that the sizing method itself shapes the drawdown, before you even consider the strategy.

Visual models

Position-sizing matrix: translate risk budget into units at a fixed stop
Position sizing tableA heatmap table shows max dollar loss and units for account sizes and risk percentages when the stop distance is one dollar and twenty-five cents.stop distance $1.25 / cell shows loss + units$25,000$50,000$100,000$250,000$500,0000.5%1%1.5%2%$125100 units$250200 units$500400 units$1,2501000 units$2,5002000 units$250200 units$500400 units$1,000800 units$2,5002000 units$5,0004000 units$375300 units$750600 units$1,5001200 units$3,7503000 units$7,5006000 units$500400 units$1,000800 units$2,0001600 units$5,0004000 units$10,0008000 unitsstandard 1% rulerisk percentaccount size columnsThe highlighted reference cell shows how the same rule scales without changing trader loss budget discipline.

Worked examples

Example 1: The same streak, two methods

An account of ten thousand takes five straight losses. Risking a fixed two percent of equity, the bets fall as the equity falls, roughly two hundred, then a touch less each time, and the account lands near nine thousand with the bet having shrunk along the way. Risking a fixed two hundred dollars instead, every loss is the full two hundred regardless, so after the same five losses the account is at nine thousand but the fixed two hundred is now a larger share of the smaller balance, and a continued streak bites harder each trade. Same strategy, different drawdown path, because of sizing alone.

Drawdown recovery curve: the gain required accelerates as equity base shrinks
Drawdown recovery curveA convex recovery curve shows that small losses require modest gains, while deep drawdowns require dramatically larger gains on a reduced equity base.0%+25%+50%+75%+100%+125%+150%-0%-10%-20%-30%-40%-50%-60%-10% -> +11%-20% -> +25%-50% -> +100%Recovery is earned on less capitalA 50% loss doubles the required return.The first job is keeping the curve shallow.gain to recoverdrawdown from equity peak

Common mistakes

Using fixed-dollar sizing into a shrinking account without noticing the rising percentage risk.

Assuming the two methods behave the same because they match on a flat account.

Picking a sizing method by habit rather than its stress behaviour.

Believing any sizing method removes risk rather than shaping it.

Ignoring that sizing alone changes the drawdown path of the same strategy.

Myth vs reality

Myth

That fixed-dollar and fixed-fractional sizing are interchangeable.

Reality

No paired reality note provided.

Myth

That fixed-fractional sizing can never lose money, rather than never quite reaching zero on a single losing track.

Reality

No paired reality note provided.

Myth

That the sizing method is a detail compared to the strategy.

Reality

No paired reality note provided.

Risk considerations

  • Fixed-dollar sizing raises your real percentage risk as the account falls.
  • Even fixed-fractional sizing can be ruined by gaps or over-large fractions, not just a smooth losing track.

Practice exercises

1. Compare the two on a streak

Run the same losing streak through both sizing methods and compare.

  1. Pick a starting equity and a losing streak length.
  2. Compute the equity path risking a fixed percentage each trade.
  3. Compute the path risking a fixed cash amount each trade.
  4. Note how the percentage risk of the fixed-dollar bet rises as equity falls.

Quiz

Q1. How do fixed-fractional and fixed-dollar sizing differ?

Q2. Why does fixed-fractional sizing cushion a drawdown?

Q3. What goes wrong with fixed-dollar sizing in a drawdown?

Try it yourself

Put the lesson math into an interactive lab and check the numbers.

Risk in $
$1,000
Stop distance
1.00
Position units
1,000
Notional
$100,000

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Risk of Ruin: What Busts Accounts

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This lesson is educational content only and is not financial advice. The formulas here are models that rely on stated assumptions (such as a known, fixed edge and independent trades); real markets violate those assumptions, so treat the numbers as intuition, not guarantees. Trading involves substantial risk of loss, and no sizing method removes it. Trade only with risk you can afford to lose.