Understanding Position Sizing in Margin Accounts

Let's break down a practical example. Say you have a portfolio worth $250,000 with margin buying power of $500,000. If you're holding roughly 5 stocks, each full position would equal $100,000 per stock ($500,000 ÷ 5).

But here's where strategy matters—you don't necessarily go all-in immediately. Most traders scale into positions gradually. Your first buy might be just 50% of that full position size, meaning you'd allocate $50,000 on the initial entry. This approach lets you average your entry point, manage risk better, and preserve dry powder for market opportunities.

This scaled-in method is especially useful in volatile markets where timing matters. You get exposure without overcommitting capital on day one.