Position Size Calculator

How to calculate position size

The formula has two steps, and neither depends on how confident you feel about the trade.

1. Risk budget = account size × risk per trade. A $50,000 account risking 1% budgets $500 for this trade.
2. Position size = risk budget ÷ stop distance. Entering at $100 with a stop at $98 puts $2 at risk per share, so $500 ÷ $2 = 250 shares.

That is the whole calculation. The stop distance is what converts an abstract percentage into a concrete number of shares, which is why a trade with no stop has no correct size — there is nothing to divide by.

Why position sizing matters more than entries

Two traders can take identical trades — same instrument, same entry, same stop, same target — and end the year with completely different accounts. The difference is size. A strategy that wins half its trades at 1.5R is genuinely profitable at 1% risk per trade and a coin flip on survival at 10%, and nothing about the strategy changed. That asymmetry is what risk of ruin measures.

Fixed-fractional sizing — a constant percentage of current equity — has a useful property built into it: as the account shrinks, so does the dollar risk. It slows a drawdown down automatically, without requiring a decision at the exact moment decisions are hardest to make.

How much should you risk per trade?

There is no universal answer, but there is a well-worn range. Most professional discretionary traders sit between 0.5% and 2% of account equity per trade. Below 0.5% the edge takes a long time to show up in the balance; above 2% a normal run of six or seven losses starts doing damage that takes months to repair.

The figure that actually matters is not the one you choose — it is the one you use. A 1% rule applied to 95 trades out of 100 is a 1% rule. Applied to 80 out of 100, it is something else entirely, and only a written record will tell you which one you have.

Common position-sizing mistakes

• Sizing by conviction. Doubling up on the trade you like best concentrates risk in exactly the setup your judgement is least neutral about.
• Sizing by capital instead of risk. "A quarter of my account" says nothing about what you lose if the stop hits — that depends entirely on how far away the stop is.
• Ignoring exposure. A tight stop produces a large position. The risk is still capped, but the capital committed can exceed the account, which matters for margin and for correlated positions.
• Moving the stop to fit the size. If the size feels too small, the answer is a different trade, not a wider stop on this one.
• Forgetting fees. Commissions and spread come out of the same budget as the stop loss.

From calculator to journal

A calculator answers the question once. The harder question is whether you sized this way across your last hundred trades — and that one needs a record. tradempower stamps risk in dollars and in R onto every trade you log, so your risk discipline becomes a metric rather than an intention.