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Position Size Calculator
Work out how many shares to buy so a trade risks only the amount you choose, based on your account size, entry price and stop-loss.
How position sizing works
Position sizing starts with how much of your account you are willing to lose if a trade goes wrong. Divide that dollar risk by the distance between your entry price and your stop-loss to get the number of shares. A wider stop means a smaller position, and a tighter stop allows a larger one.
The 1% rule
Many traders risk no more than 1% to 2% of their account on any single trade. That way, even a long run of losing trades leaves most of the account intact and gives a sound strategy time to work.
Worked example
Your account is worth $25,000 and you're willing to risk 1% of it, $250, on one trade. You plan to buy at $50 with a stop-loss at $46, so you risk $4 per share. $250 ÷ $4 = 62 shares (rounded down), a position of about $3,100, or roughly 12% of your account. If the stock hits a $58 target, you'd make about $496, a reward-to-risk ratio of 2 to 1.
Why size positions by risk
Sizing every trade so a loss costs the same small share of your account keeps any single mistake from doing serious damage. At 1% risk per trade, even ten losing trades in a row would cost about 10% of your account, a setback you can recover from. Many traders risk between 0.5% and 2% per trade. Remember that a stop-loss can fill below your stop if a stock gaps lower overnight, so your actual loss can be larger than planned.
Related guides
Market vs. limit vs. stop orders · What is beta? · How to read stock charts · How to diversify your portfolio · Stock profit calculator
Frequently asked questions
What is reward-to-risk?
It compares the potential gain to your target with the potential loss to your stop. A ratio of 2:1 or higher means each winning trade can make up for at least two losing trades.
Does a stop-loss guarantee my maximum loss?
No. Prices can gap past a stop, especially overnight or around earnings, so the actual loss can be larger. Commissions and slippage also add to the cost.
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