Position Sizing Calculator
Calculates how many shares to buy so that a single losing trade never risks more than a set percentage of your account. Essential for systematic risk management before entering any trade.
About this calculator
Position sizing is the process of determining the number of shares (or units) to trade so that a worst-case stop-loss hit costs only a predefined fraction of your capital. The formula is: shares = floor((accountBalance × riskPercentage / 100) / |entryPrice − stopLoss|). The numerator is your maximum dollar risk per trade. The denominator is the per-share risk — the distance between your entry price and your stop-loss level. Dividing the two gives the exact share count that keeps your loss within budget if the stop is triggered. The floor function ensures you don't buy fractional shares. This method, often called the '1% rule' (or 2%), is a cornerstone of professional trading discipline.
How to use
Your account holds $25,000 and you risk 1% per trade ($250 maximum loss). You plan to enter a stock at $40.00 with a stop-loss at $37.50, giving a per-share risk of |40.00 − 37.50| = $2.50. Shares = floor(250 / 2.50) = floor(100) = 100 shares. If the stop triggers, you lose exactly $250, or 1% of capital. Enter $25,000, 1%, $40.00, and $37.50 into the calculator to confirm.
Frequently asked questions
Why is position sizing important in stock and forex trading?
Position sizing ensures that no single trade can cause catastrophic damage to your account. Even a strategy with a 40% win rate can be profitable long-term if losses are kept small relative to gains. Without it, one oversized losing trade can wipe out weeks of steady gains. Professional traders consider it as important as the entry signal itself.
How does stop-loss distance affect position size?
The wider your stop-loss, the fewer shares the formula allocates, because each share carries more risk. A tight stop at $1 away allows four times as many shares as a $4 stop for the same dollar risk budget. This means volatile stocks with wide necessary stops automatically get smaller position sizes, naturally reducing exposure on riskier trades.
What percentage of account balance should I risk per trade?
Most risk-management guidelines suggest risking between 0.5% and 2% of total capital per trade. Risking 1% is a common professional standard — it allows roughly 100 consecutive losses before the account is depleted. Beginners are often advised to start at 0.5% until their strategy is validated. Risking more than 2% per trade dramatically increases the probability of a catastrophic drawdown.