In the previous section we covered how to think about the price range. This section covers what is arguably the most important part of the entire strategy: position sizing and maximum drawdown (DD).
Without a solid foundation here, even a well-designed range will collapse the moment the market moves against you.
Why position sizing comes first
It's tempting to size positions based on the profit you'd like to make. The right approach is the opposite: size based on the loss you can survive if the market keeps moving against you.
Calculating maximum drawdown
- Assume price falls to the lower bound of your range.
- Sum the unrealized loss across all open grid orders at that point.
- That total is your worst case — make sure your account can hold it without margin call.
If the number scares you, reduce position size until it doesn't. That's the right level.
With the design and sizing decided, the next step is the trading environment: which exchange, what settings, and how to start.