Position size is how much exposure you take on a single trade, calculated from the loss you are prepared to accept rather than from how confident you feel. Risk-based sizing keeps the worst-case loss identical across every setup, no matter how far away the stop loss sits. It is the habit that separates traders who survive drawdowns from those who don't.
Risking 1% with a tight 20-pip stop lets you trade a larger size than the same 1% with a wide 100-pip stop — the dollar risk stays the same, only the size changes.
This definition is for educational purposes only and is not financial advice. Trading involves risk.