This article explains what traders usually mean when they mention a 3 5 7 rule and why that phrasing is best seen as an internal risk budgeting shorthand. It then gives a clear, step by step position sizing workflow for spread betting that converts a chosen risk percentage and a stop distance into a stakeholder per point using a simple formula. The goal is practical: you will learn how to compute stake per point reliably, how to apply simple portfolio caps, and how to avoid the most common sizing mistakes that increase drawdowns. Examples and resources are provided so you can test the workflow in a simulator or private tracker.

Treat 3 5 7 as an optional heuristic, not a regulator backed rule.

Stake per point should be calculated from account risk and stop distance to control losses.

Aggregate exposure across correlated positions to avoid stealth concentration.

Quick overview: why 'how to spread bet' matters for risk management

Knowing how to spread bet with disciplined position sizing is essential because spread bets link your stake per point directly to profit and loss, and leverage can magnify outcomes quickly. To size positions reliably you should treat any "3 5 7" phrasing as an optional shorthand and start from a math first approach where stake per point is derived from account risk and stop distance, not from fixed ticket sizes. For background on linking risk and stop distance to size see the position sizing primer from a respected educational source Position Sizing

converts risk percent and stop distance into stake per point

use integer or decimal stops

This article will walk you through what the 3 5 7 phrase usually means, why it is not a regulator endorsed rule, how spread betting mechanics make stake per point the operational core of sizing, and a step by step workflow that turns a chosen risk percentage into a concrete stake. Along the way you will find decision criteria for tightening or skipping trades and practical checks to prevent accidental overexposure.

What this article will cover

Readers will get a clear definition of the shorthand, a practical formula to compute stake per point, examples showing the formula under different stop distances, and a short checklist to implement today. Where I rely on supervisory or educational guidance I include the original source for readers to consult.

Who should read it and what you will be able to do

This guide is aimed at sports traders and recreational spread bettors who want to convert a risk policy into a stake size for spread bets, and for handicappers testing position sizing in funded challenges or simulators. After reading you should be able to calculate stake per point from a chosen risk percent and stop distance and apply simple portfolio caps.

Definition and context: what people mean by a "3 5 7" rule in trading

In trader education the phrase 3 5 7 often appears as a compact way to suggest layered limits, for example a per trade cap, a portfolio exposure cap, and a session or weekly drawdown cap, rather than as a formula for stake per point. Regulatory and supervisory materials do not define a universal 3 5 7 rule, so it should be treated as an optional internal heuristic when it is used by educators or coaches Trends, Risks and Vulnerabilities Report 2025

Origins and where the phrase appears

The shorthand likely arises from practical trader checklists that prefer low friction rules that are easy to remember. Traders and coaches use such numbers to encourage discipline, for example by limiting per trade losses, capping same day exposure, and setting a stop out for a session. These rules are convenience tools rather than substitutes for the numeric position sizing math that links account equity and stop distance.

Why it is not a universal or regulator-backed rule

No major regulator or textbook prescribes a specific 3 5 7 standard for retail trading. European supervisory reporting continues to emphasise the risks of leveraged retail products and the need for robust risk controls, which supports treating any number based shorthand as an internal policy rather than an industry requirement Spread betting risk guidance

How spread betting works and the core position-sizing idea

Spread betting settles profit or loss as stake per point multiplied by the movement in market points, so the operational question is how large that stake should be for a given stop distance and account risk. This mechanic is central to sizing because stake per point, not a fixed ticket size, determines exposure in a spread bet Spread Betting

Because spread bets are typically leveraged, retail clients face elevated risk and should use conservative sizing and strict stop discipline. Supervisory material and consumer guidance highlight that leverage can quickly amplify losses, which makes translating a chosen risk percentage into a stake per point a priority before entering any trade Spread betting risk guidance

Try sizing in a funded challenge environment

Try the stake per point calculation in a private tracker or simulator before using real capital to see how stop distance affects your stake and potential exposure

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The practical calculation traders use is straightforward: stake per point equals account balance times the chosen risk percentage, divided by the stop distance measured in points. A simple implementation in a spreadsheet or calculator turns an abstract risk percent into an operational stake size that directly controls the maximum loss if the stop is hit What is stake size in spread betting (other calculators exist, e.g. lot size calculator).

Mechanics: stake per point and leveraged P&L

Understanding that profit or loss equals stake per point times movement clarifies why stop distance is the primary sizing input: a wider stop means the same risk requires a smaller stake per point, while a tight stop allows a larger stake for the same risk budget. This relationship is the reason formulaic sizing is preferred over fixed ticket sizes How to Calculate Position Size (see also position sizing guide).

Why stop distance matters more than fixed ticket sizes

Stop distance reflects market structure and volatility; it should be chosen based on technical or structural reasons, not to fit a desired stake. Once the stop is set, the stake must be calculated to keep the risk per trade within your policy.

Why a numeric shorthand like 3 5 7 is not a substitute for math

Fixed-number rules suffer a basic limitation: they ignore the stop distance and account size, so they cannot reliably translate into a stake per point without an implicit and potentially concealed assumption about the stop. That is why a math-first approach that anchors risk to account equity and stop distance is essential Position Sizing

Where heuristics have value is as layered guardrails that sit above the sizing math. For example a trader might use a per trade risk cap, a portfolio exposure cap to limit simultaneous correlated positions, and a session or weekly drawdown cap to prevent catastrophic erosion of the account. These caps are sensible complements, but they should not replace the formula that computes the stake for each individual trade.

Supervisory reporting and consumer guidance about leveraged products underline the need for conservative controls and clear documentation of rules. That context supports using heuristics as secondary limits while keeping the primary decision anchored to the position sizing calculation Trends, Risks and Vulnerabilities Report 2025

Limitations of fixed-number rules

Because fixed numbers do not scale with account size or stop width, applying them mechanically can lead to overrisking or underutilising an account. A useful rule of thumb is to ask whether a shorthand changes behaviour in a way that remains consistent across different account sizes and volatile markets; if it does not, the shorthand needs to be translated into math.

How heuristics can complement formulaic sizing

Good practice is to document both the formula used to size each trade and a short set of guardrails that cap total exposure and session losses. That dual layer keeps day to day decision making simple while preserving a quantitatively sound foundation for each stake decision.

Step-by-step: a practical position-sizing workflow for spread bets

Step 1 is to set a clear account risk percentage, which becomes your per-trade budget. Treat this as a personal policy and not investment advice. Many educators recommend conservative, single digit or sub single digit percentages as starting points for retail sized accounts, and the general position sizing literature explains why choosing a percent first is central to consistent sizing How to Calculate Position Size

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Step 2 is to choose a stop loss based on market structure, technical levels, or a volatility assessment. The stop should reflect the point at which your trade hypothesis is invalidated, not a number picked to make a stake feel comfortable. Once the stop is fixed you can compute the stake per point. For details on how funded evaluations work see how funded evaluations work.

Step 3 is to apply the formula: stake per point equals account balance times risk percent divided by stop distance in points. Implement that formula in a spreadsheet or calculator so every trade uses the same procedure, and record the inputs and outputs for later review What is stake size in spread betting

Step 1: set account risk percentage

Decide your per trade risk as a percentage of account equity and document it. This percentage is a behaviour anchor. If you change it frequently you will undermine the discipline the approach aims to create, so treat it as a rule that gets reviewed periodically, not in the middle of a session.

Step 2: choose stop loss based on market structure

Let market structure or volatility define the stop in points. A stop tied to a structural invalidation point will make your edge testable and will prevent arbitrary stop widening after entry, a common sizing mistake that erodes the risk plan Position Sizing

Step 3: compute stake per point and cap exposure

Apply the formula to compute stake and then compare the stake to any portfolio caps you maintain. If the stake would breach total exposure limits across correlated instruments, reduce the stake or skip the trade. Recording the calculation for every trade helps enforce discipline and aids post trade review What is stake size in spread betting

Decision criteria: when to widen or tighten size and when to skip a trade

Tighten size when measured volatility is higher than expected, when correlated exposure is already present in the portfolio, or when your remaining risk budget for the session or week is low. These objective triggers help keep risk consistent across different market conditions How to Calculate Position Size

Criteria tied to market structure and volatility

If a stop must be wider due to elevated volatility, calculate the smaller stake that preserves the same risk percent rather than widening acceptable loss. Conversely, in very low volatility situations a smaller stop can allow a larger stake but only if the stop still reflects a structural invalidation.

Portfolio-level checks before taking a position

Before opening a trade, verify that combined exposure across correlated positions does not exceed your portfolio cap. A simple practical check is to list open exposures by underlying risk and sum their worst case losses under current stops to ensure the total remains within the permitted drawdown range Trends, Risks and Vulnerabilities Report 2025

Common sizing mistakes and how to avoid them

Sizing by conviction is one of the most frequent mistakes: increasing stake because you feel more certain usually increases drawdowns relative to a fixed risk plan. Stick to your documented risk percentage to preserve long term consistency Position Sizing

How should I size spread bets so a single loss does not derail my account?

Define a per trade risk percentage, set a stop loss based on market structure, and compute stake per point using the formula stake per point = account balance times risk percent divided by stop distance. Enforce portfolio caps and session drawdown limits.

Stacking correlated positions is another error that silently increases portfolio risk because separate trades may look independent but behave similarly under market stress. A simple preventive step is to tag trades by correlation category and cap total exposure per category before adding any new position.

Avoid sizing by conviction

Belief in a trade should not replace a risk policy. Using conviction to override preset size rules turns a strategic procedure into an emotional reaction, which undermines repeatable performance measurement and evaluation.

The dangers of stacking correlated positions

When several trades move together the cumulative loss can exceed any single trade limit, so caps on correlated exposure are essential. Maintain a short list of correlation buckets and keep per-bucket exposure under review to avoid unintended concentration.

Other frequent errors

Other common problems include widening stops after entry to avoid a loss, not recording trade calculations, and failing to enforce session or weekly drawdown limits. Practical fixes are preset stop discipline, automated stake calculation, and a hard session stop rule to prevent emotional escalation How to Calculate Position Size

Practical examples and scenarios using the stake-per-point calculation

Scenario A illustrates a situation with a tight stop where the stop in points is small, which allows a larger stake per point for the same risk percent. This makes the trade size operationally sensible without exposing the account to a larger absolute loss, provided the stop is chosen for structural reasons What is stake size in spread betting

Scenario B shows a wide stop where the stop distance is large, which forces the computed stake per point to be smaller or for the trader to skip the trade if the required stake would be too small to be operationally useful. The formula makes that trade off explicit so you can make disciplined choices.

Scaling rules across multiple correlated trades

When opening multiple trades with overlapping risk drivers, aggregate the worst case losses under current stops and reduce individual stakes to keep the combined exposure within your portfolio cap. That practice prevents stealth concentration even when each trade individually meets the per trade risk rule Position Sizing

Remember that these scenarios are illustrative. Actual outcomes depend on market movements and on how faithfully you apply the stop and stake rules in practice.

Minimalist 2D vector trading dashboard mockup showing multiple correlated positions with aggregated exposure totals and a red session drawdown cap indicator in Funded Plays color palette how to spread bet

Tools, resources and next steps

Use a simple stake per point calculator or a spreadsheet that implements the formula stake per point = account balance times risk percent divided by stop distance. Many educational resources walk through the calculation and provide worksheets to implement it quickly What is stake size in spread betting. See calculators such as IG's spread betting calculator.

For regulatory and consumer risk context consult authoritative supervisory reports and consumer guidance about leveraged products, which clarify the potential for rapid losses and the value of conservative limits Trends, Risks and Vulnerabilities Report 2025

Next steps are to build a documented personal risk policy, implement the stake calculation in a tracker or simulator, backtest sizing choices on historical selections, and enforce session and weekly drawdown caps during live use. Read related posts on the Funded Plays blog.

Conclusion: keep math first, use heuristics as guardrails

Anchor every trade to the math: compute stake per point from a stated risk percent and a stop distance set by market structure, and treat any 3 5 7 shorthand as an optional set of guardrails that sit above that calculation. This approach preserves discipline and makes outcomes measurable Position Sizing

Final checklist to implement today: document your per trade risk percent, always compute stake per point from account and stop distance before entering a trade, and maintain simple portfolio caps on correlated exposure and session drawdown. See the Funded Plays homepage for tools and resources.

Is the 3 5 7 rule an industry standard?

No. The 3 5 7 phrasing is an internal heuristic used by some educators and is not a regulator defined standard.

How do I convert my risk percent into a stake for spread bets?

Use the formula: stake per point = account balance times risk percent divided by stop distance, implemented in a calculator or spreadsheet.

What quick checks prevent accidental overexposure?

Tag correlated trades, sum their worst case losses under current stops, and cap total exposure per correlation bucket before opening new positions.

Consistent sizing and clear guardrails make your trading decisions testable and repeatable. Use the formula and the checklist in this article to enforce discipline, then review results and refine your personal rules over time. Remember that spread bets are leveraged and can lead to rapid losses, so conservative sizing, strict stops, and documented limits are the practical foundation of responsible participation.