Deciding position size based on risk:
1. Risk Fixed percentage of the capital, say 1% per trade. If your capital is 10 lakhs, risk 10k, if it becomes 9 lakhs, risk 9k.
2. Risk fixed amount of capital, say 10k per trade. Even if capital is 10 lakhs or 9 lakhs, risk 10k.
3. Risk more amount from winnings + fixed amount from capital. Say you are in profit of 2 lakh on 10 lakh capital, Risk 1% on capital = 10k + 5% of profits = 10k, total 20k
4. Risk the money you earned in previous trading session or previous week profits.
5. Increase the risk during losses (Martingale). Start with 0.5% risk, if lost increase to 1%, then 2%. So eventually a win will cover all. But one bad streak will blow the capital
6. Volatility based positon sizing based on ATR. If ATR is higher, lower the position size
7. Pyramiding : Enter with small position sizing and add more positions as the trade continues to move in your favor. Here you are taking small risk with limited positon sizing initially and then taking additional risk with the money you earned from market by trailing SL
8. A bit mathematical. Calculate the percentage of your capital that you should use by Kelly's formula:
Kelly % = W - [(1-W)/R]
W is historical win percentage of your trading strategy.
R is profit/loss ratio.