Position Size Calculator
Calculate the right position size to manage risk effectively on any trade.
Trade Details
Recommended Position Size
40 shares
Max Risk Amount
$200
Position Value
$4,000
Risk Per Share
$5.00
Portfolio Exposure
40.0%
Risk Scenarios
💡 Professional Tip
Most professional traders risk no more than 1–2% per trade. At 2% risk, you can lose 50 consecutive trades before losing your entire account — giving your strategy time to play out.
Consecutive losses before 50% drawdown
What is Position Sizing?
Position sizing is the process of determining how many shares, contracts, or units to buy or sell on a given trade so that if the trade hits your stop loss, you lose only a predetermined amount of your trading capital — typically 1–2%.
It is arguably the most important concept in trading risk management — more important than entry timing, more important than which asset you trade. A trader with mediocre entries but excellent position sizing can survive and eventually thrive. A trader with great entries but no position sizing can blow up their account on a single bad trade.
The position size is calculated by dividing the dollar amount you are willing to risk by the distance between your entry price and your stop loss price. This ensures every trade has the same dollar risk regardless of which stock you are trading or how volatile it is.
Position Size Formula
Position Size = (Account × Risk%) / (Entry − Stop Loss)
Worked Example
Account: $10,000 | Risk: 2% | Entry: $100 | Stop Loss: $95
Dollar Risk = $10,000 × 2% = $200
Risk Per Share = $100 − $95 = $5
Position Size = $200 / $5 = 40 shares
Total Position Value = 40 × $100 = $4,000 (40% of account)
If the trade hits the stop loss at $95, you lose 40 × $5 = $200 — exactly 2% of your account. No matter how the trade performs otherwise, your maximum loss was predetermined before you entered.
Why 1–2% Risk Per Trade?
The 1–2% rule is not arbitrary — it is based on the mathematics of drawdown and survival. Here is what happens to a $10,000 account after consecutive losing trades at different risk levels:
| Consecutive Losses | 1% Risk | 2% Risk | 5% Risk | 10% Risk |
|---|---|---|---|---|
| 5 losses | $9,510 | $9,039 | $7,738 | $5,905 |
| 10 losses | $9,044 | $8,171 | $5,987 | $3,487 |
| 20 losses | $8,179 | $6,676 | $3,585 | $1,216 |
| 50 losses | $6,050 | $3,642 | $769 | $51 |
Starting account: $10,000. At 10% risk, 20 consecutive losses leaves you with $1,216 — nearly wiped out. At 1% risk, 50 consecutive losses leaves $6,050 — still very much alive.
Position Sizing Across Different Asset Classes
📈
Stocks
Standard formula (shares = risk $ / distance to stop). Works cleanly for equity positions.
💡 Use a wider stop on volatile stocks and a tighter stop on stable ones — let volatility determine stop placement, then let stop determine position size.
💱
Forex
Position size is in lots (1 standard lot = 100,000 units). Risk per pip × pips to stop = position size in lots.
💡 Account for the pip value of each currency pair — it varies. EUR/USD pip value is $10/pip on a standard lot.
📊
Futures
Position size is in contracts. Each contract has a fixed dollar value per tick. Risk $ / (ticks to stop × tick value) = contracts.
💡 Futures contracts have large notional values — a single ES (S&P 500) contract is worth $50 per point. Small accounts should use micro futures.
₿
Crypto
Same formula as stocks but with much wider stops due to high volatility. Most crypto trades require 5–15% stop distances.
💡 A $10,000 account with 2% risk on a crypto trade with a 10% stop can only buy $200 worth — 2% of account. High volatility = smaller positions.
Frequently Asked Questions
❓ What percentage of my account should I risk per trade?
Professional traders overwhelmingly use 1–2% per trade. Beginners often start at 0.5–1% while learning. Never risk more than 5% on any single trade — the math of drawdown recovery becomes brutal. To recover from a 50% drawdown, you need a 100% gain. Risk management is not about making money — it is about surviving long enough to make money.
❓ Should I always use the calculated position size?
Yes, with one exception: if the calculated position is too large relative to average daily volume of the stock (causing market impact), scale it down. For most retail traders on liquid stocks this is not an issue. Also cap your total portfolio exposure — even with correct sizing, having 10 correlated positions all moving together can create concentrated risk.
❓ How do I set a proper stop loss distance?
Stop loss should be placed at a technically meaningful level — below support, below a swing low, or beyond a key moving average — not at an arbitrary percentage. The stop determines the position size, not the other way around. If a proper stop requires too small a position to be worth trading, skip the trade.
❓ What is portfolio heat and why does it matter?
Portfolio heat is the total percentage of your account at risk across all open positions. If you have 5 positions each at 2% risk, your total portfolio heat is 10% — meaning if all 5 hit stops simultaneously (possible in correlated market sell-offs), you lose 10% of your account in one session. Most professionals cap total portfolio heat at 6–10%.
❓ Does position sizing work for investing (not just trading)?
The concept applies. Long-term investors can use position sizing to ensure no single stock represents more than 5–10% of their portfolio at cost. This is not stop-loss based sizing but allocation-based sizing — ensuring a total collapse of any one holding (like Enron or Lehman) cannot devastate the overall portfolio.