Calculator Inputs
$
Total trading capital. For focused traders, use only the capital allocated to this strategy.
%
% of account you're willing to lose on this trade. Professional traders typically use 1–2%.
$
The price at which you plan to buy the stock.
$
Price at which you'll exit if wrong. Must be below entry. Usually below key support.
$
Your profit target. Used to calculate the risk/reward ratio. Enter 0 to skip.
Position Sizing Result
Shares to Buy
62
Maximum shares at your risk level
Position Size
$6,200
24.80% of account
Max Risk Amount
$496.00
2.00% of account
Risk Per Share
$8.00
Entry minus stop-loss
Risk/Reward Ratio
1 : 2.50
Favorable
Potential Gain (at target)
$1,240
Trade Visualization
Target
Entry
Stop
Risk per share: $8.00Stop distance: 8.00%Risk/Reward: 1 : 2.50
Risk Level Comparison — Same Trade, Different Risk %
How position size changes at different risk tolerances for this exact trade setup.
| Risk % | Max Loss ($) | Shares | Position Size | % of Account | |
|---|---|---|---|---|---|
| 0.50% | $125.00 | 15 | $1,500 | 6.00% | ✓ Conservative |
| 1.00% | $250.00 | 31 | $3,100 | 12.40% | ✓ Conservative |
| 1.50% | $375.00 | 46 | $4,600 | 18.40% | ✓ Conservative |
| 2.00% ◀ selected | $500.00 | 62 | $6,200 | 24.80% | ✓ Conservative |
| 3.00% | $750.00 | 93 | $9,300 | 37.20% | ⚠ Moderate |
| 5.00% | $1,250 | 156 | $15,600 | 62.40% | ✗ High risk |
Stop-Loss Placement Scenarios
How share count changes based on different stop-loss distances from entry ($100.00).
| Stop Distance | Stop Price | Risk/Share | Shares | Position Size |
|---|---|---|---|---|
| 2.00% | $98.00 | $2.00 | 250 | $25,000 |
| 4.00% | $96.00 | $4.00 | 125 | $12,500 |
| 6.00% | $94.00 | $6.00 | 83 | $8,300 |
| 8.00% ◀ your stop | $92.00 | $8.00 | 62 | $6,200 |
| 10.00% | $90.00 | $10.00 | 50 | $5,000 |
| 12.00% | $88.00 | $12.00 | 41 | $4,100 |
| 15.00% | $85.00 | $15.00 | 33 | $3,300 |
Why Position Sizing Matters
Most traders focus on entry/exit timing, but position sizing is what keeps you in the game. If you risk 10% per trade, five losing trades in a row (not uncommon) wipes out 40% of your account. At 1–2% per trade, five losses only costs 5–10% — manageable and recoverable.
The 1% and 2% Rules
Professional traders typically risk 0.5–2% of capital per trade. The 1% rule: never lose more than 1% on any single trade. The 2% rule: never lose more than 2%. This means a $25,000 account risks $250–$500 per trade — allowing 50–100 bad trades before account destruction.
Risk/Reward Ratio
R/R = (target − entry) / (entry − stop). A 1:2 ratio means you make $2 for every $1 you risk. Only take trades with R/R ≥ 2:1 unless your win rate is very high. At 50% win rate: you need at least 1:1 R/R to break even, and at least 1:2 to be profitable long-term. If you want to check whether your entry rules actually produce that win rate historically, a strategy backtester can test them against real price data.
Setting Your Stop-Loss
Place stops at technically meaningful levels — below key support, below a moving average, or below the low of the entry candle. Don't set them at round numbers (everyone else does too). Your stop should be where your trade thesis is proven wrong, not where you just feel comfortable.
Frequently Asked Questions
What is position sizing?
Position sizing determines how many shares (or contracts) to buy so that a losing trade costs a fixed percentage of your account. Professional traders typically risk 0.5%–2% of their portfolio per trade. This ensures a long losing streak doesn't destroy the account and keeps losses manageable.
How do you calculate position size?
Position size = (Account Size × Risk %) / (Entry Price − Stop-Loss Price). For example: $50,000 account, 1% risk ($500), entry at $100, stop-loss at $95 (risk per share = $5). Position size = $500 / $5 = 100 shares. This ensures a full stop-out costs exactly $500, or 1% of your account.
What is a good risk/reward ratio?
A risk/reward ratio of 1:2 or better is generally recommended — meaning you target at least $2 in profit for every $1 risked. At a 1:2 ratio, you can be profitable even if you win only 40% of your trades. Many professional traders require 1:3 or higher before entering a position.
How much of my portfolio should I risk per trade?
Most professional traders risk 0.5%–2% per trade. At 1% risk, you can lose 10 trades in a row and still have 90% of your capital. Risking more than 2–3% per trade introduces significant drawdown risk. The 1% rule is a common starting point for position sizing discipline.
Should position size change with a stock's volatility?
Yes — position sizing is really about dollar risk, not share count. A more volatile stock typically needs a wider stop-loss to avoid being shaken out by normal price swings, which means a larger risk per share and therefore fewer shares bought to keep the same dollar risk. Adjust the stop-loss distance in this calculator to see how it changes your share count.
What happens if I don't use proper position sizing?
Without consistent position sizing, a single oversized loss can wipe out weeks or months of gains and make emotional decision-making more likely on the next trade. Traders who size positions inconsistently — going large on 'conviction' trades — tend to see their worst losses on exactly those oversized positions.
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