How do I calculate position size?

Multiply your account size by the percentage you are willing to risk to get a dollar risk amount, then divide by the distance between your entry price and stop-loss. With $25,000, 1% risk, a $50 entry and a $47.50 stop, you can buy $250 ÷ $2.50 = 100 shares.

What is the 1% rule in trading?

The 1% rule says never risk more than 1% of your account on a single trade. Ten losing trades in a row would then cost only about 10% of the account, leaving plenty of capital to recover.

Where should I put my stop-loss?

Place the stop where the trade idea is proven wrong, such as just below a support level, a recent swing low or a moving average, rather than at an arbitrary percentage. Then let the position size adjust to that distance.

What is a good reward-to-risk ratio?

Many traders look for at least 2:1, meaning the potential gain to the target is twice the potential loss to the stop. With a 2:1 ratio you can be right less than half the time and still be profitable.

Does a stop-loss guarantee my maximum loss?

No. A stop-loss order becomes a market order when triggered, so a stock that gaps down overnight or on news can fill well below your stop. Actual losses can exceed the planned risk.

Position Size Calculator

Work out how many shares to buy so that a trade that hits your stop-loss costs only the percentage of your account you are prepared to lose.

Account size

Risk per trade

Many traders risk 0.5% to 2%

Entry price

Stop-loss price

Above entry for a short position

Target price (optional)

Used for the reward-to-risk ratio

Shares to buy: 100; $250 risk ÷ $2.50 per share
Position value: $5,000; 20.0% of account
Amount at risk: $250; 1.00% of account
Risk per share: $2.50; 5.00% from entry
Reward-to-risk: 3.00 : 1; Potential gain $750

How the position size calculator works

Position sizing answers one question: how many shares should I buy? Instead of picking a round number or a fixed dollar amount, you start from how much you are willing to lose if the trade goes wrong. Enter your account size, the percentage of the account you will risk, your planned entry price and the price where you will exit if you are wrong (your stop-loss). The calculator divides your dollar risk by the risk per share to give the share count, then shows the capital the position ties up and the amount actually at risk after rounding down to whole shares.

Add a target price to see the reward-to-risk ratio. If the stop is above your entry, the calculator treats the trade as a short sale. When a very tight stop would call for more shares than your account can buy, the result is capped at what you can afford without margin.

The position sizing formula

Dollar risk       = Account size × Risk %
Risk per share    = |Entry price − Stop price|
Shares            = floor(Dollar risk ÷ Risk per share)
Position value    = Shares × Entry price
Reward-to-risk    = |Target − Entry| ÷ Risk per share

Shares are rounded down so the loss at the stop never exceeds the risk budget.

Why fixed-risk sizing works

Fixed-fractional sizing keeps every loss roughly the same size relative to your account, no matter how volatile the stock or how far away the stop is. A wide stop on a volatile stock produces a smaller position; a tight stop on a quiet stock produces a larger one. Over many trades this keeps a losing streak from doing lasting damage and makes results depend on your edge rather than on a few oversized bets.

It also forces discipline before you enter. If the correct stop is so far away that the position becomes too small to be worthwhile, that is useful information: the trade may not be worth taking. Checking a stock's volatility, average volume and recent range on its chart page helps you set a stop the market is unlikely to trigger by random noise.

Things the calculator does not include

Commissions, the bid-ask spread and slippage all add a little to real losses, and overnight gaps can jump straight past a stop. Many traders risk 0.5% to 2% per trade and cap total open risk across all positions. For longer-term investing rather than trading, the stock return calculator is a better fit.

Frequently asked questions

How do I calculate position size?: Multiply your account size by the percentage you are willing to risk to get a dollar risk amount, then divide by the distance between your entry price and stop-loss. With $25,000, 1% risk, a $50 entry and a $47.50 stop, you can buy $250 ÷ $2.50 = 100 shares.
What is the 1% rule in trading?: The 1% rule says never risk more than 1% of your account on a single trade. Ten losing trades in a row would then cost only about 10% of the account, leaving plenty of capital to recover.
Where should I put my stop-loss?: Place the stop where the trade idea is proven wrong, such as just below a support level, a recent swing low or a moving average, rather than at an arbitrary percentage. Then let the position size adjust to that distance.
What is a good reward-to-risk ratio?: Many traders look for at least 2:1, meaning the potential gain to the target is twice the potential loss to the stop. With a 2:1 ratio you can be right less than half the time and still be profitable.
Does a stop-loss guarantee my maximum loss?: No. A stop-loss order becomes a market order when triggered, so a stock that gaps down overnight or on news can fill well below your stop. Actual losses can exceed the planned risk.

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Calculator results are hypothetical projections based on the inputs you enter, not predictions or guarantees. Market data is delayed at least 15 minutes and provided for informational purposes only. Not investment advice. Full disclaimer