Variation in growth and habitat use is closely connected to individual responses to habitat specific resource levels and predation risk. In three mountain lakes which differed in the density of young‐of‐the‐year (YOY) arctic char (Salvelinus alpinus), we studied the growth, diets and habitat use of YOY char in relation to resource levels. With two model approaches, we further examined the extent to which YOY and 1‐yr old char were resource limited and, if so, whether resource limitation was associated with habitat use and small char densities. Benthic prey dominated the diet of YOY char and YOY char habitat use was restricted to the near‐shore habitat in all lakes. In all lakes were chironomid densities higher in the near‐shore habitat than in the offshore benthic habitat whereas zooplankton densities were higher in the pelagic than in the near‐shore habitat. Growth of YOY char in all lakes was close to predicted maximum growth despite large variation in YOY densities between lakes. Model results suggested that density dependent resource limitation in YOY char is unlikely to occur despite restricted near‐shore habitat use. In contrast, strong density dependent resource limitation was predicted in 1‐yr old char with a restricted habitat use to the near‐shore habitat. Correspondingly, field data suggested that the habitat use of 1‐yr old char was density dependent as the use of the offshore habitat increased earlier in time and to a larger extent at high densities. As small individuals are vulnerable to predation but constrained by their low food processing capacity relative to their encounter capacity, we suggest that resource limitation in small individuals should be less pronounced and habitat use should mainly depend on predation risk. A trade‐off in habitat use between foraging gain and predation risk is therefore expected to be more likely for individuals, large enough to be resource limited but still small enough to be vulnerable to predation.