How position sizing actually works
Position size is the one variable that decides how much a losing trade costs you. Get it wrong and a normal loss becomes an account-threatening one. The calculation itself is simple — the discipline is in doing it before every trade rather than sizing by feel.
The formula
Position size = (Account × Risk%) ÷ |Entry − Stop|
Two numbers you decide in advance (account size, risk percentage) and two the chart gives you (entry, stop). The result is how many units you can hold such that being stopped out costs exactly your intended risk — no more.
A worked example
A $10,000 account risking 1% per trade puts $100 at risk. Entering at $50 with a stop at $48 means $2 of risk per share. $100 ÷ $2 = 50 shares, a $2,500 position. If the stop hits, you lose $100 — 1% — regardless of how large the position looks.
Why the position can get capped
A tight stop implies a large position. If the maths asks for more than your account can fund, the size is capped by available capital and your real dollar risk drops below target. The calculator flags this when it happens, because a capped position quietly changes the trade you thought you were taking.
Risk percentage is the decision that compounds
Most position-sizing advice lands between 0.5% and 2% per trade. The exact figure matters less than applying it consistently: at 1% risk, ten consecutive losses cost about 10% of the account. At 5%, the same streak costs roughly 40% — and streaks of that length are ordinary variance, not evidence of a broken strategy.
Sizing in crypto and forex
The formula is identical; only the unit changes. For crypto, "units" are coins or contracts. For forex, convert the result into lots — a standard lot is 100,000 units, a mini 10,000, a micro 1,000. One caveat worth knowing: a stop that is appropriately wide for a large-cap stock is often far too tight for a volatile altcoin, so size against the asset's actual volatility rather than a flat percentage everywhere.
From sizing to R-multiples
Once every trade risks the same amount, results become directly comparable: a trade that made twice its risk is +2R, whatever the dollar figure. That normalisation is what makes a trading record analysable rather than just a list of wins and losses.
Frequently asked
What risk percentage should I use?
There is no universal answer, but consistency matters more than the exact number. Many traders settle between 0.5% and 2%. The important part is deciding in advance and not raising it mid-drawdown.
Should the stop be based on price or percentage?
Base it on where the trade idea is actually invalidated — a level on the chart — not on a round percentage. Then let the position size follow from that distance, which is exactly what this calculator does.
Does this work for short trades?
Yes. Switch to Short and the stop sits above entry. The maths is direction-agnostic: risk per unit is the absolute distance between entry and stop.
Is anything I type here stored or sent anywhere?
No. The calculation runs entirely in your browser. Nothing is transmitted, logged, or saved.
This calculator is for educational purposes only and is not financial advice. Trading involves risk, including loss of capital. Always verify position sizes against your broker's own figures before trading.