Position Size Calculator
Calculate your optimal position size to manage risk effectively. Protect your capital by sizing every trade correctly.
How to Use the Position Size Calculator
- Enter Account Balance: Input your total trading capital.
- Set Risk Percentage: Choose the % of your account you are willing to lose on this trade (typically 1-2%).
- Determine Entry Price: The price at which you plan to buy the stock.
- Set Stop Loss: The price at which you will exit if the trade goes against you.
- View Results: The calculator instantly shows how many shares you should buy to stay within your risk limit.
What is Position Sizing?
Position sizing is the most critical component of risk management. It answers the question "How much should I buy?" rather than "What should I buy?". By adjusting your position size based on the distance to your stop loss, you ensure that regardless of the trade's outcome, you never lose more than a fixed percentage of your account.
Why Traders Use This Tool
- Preserve Capital: Prevent catastrophic losses that can wipe out your account.
- Consistent Growth: Normalize risk across different trades, making your equity curve smoother.
- Remove Emotion: Make decisions based on math and logic, not greed or fear.
FAQS
What is a good risk percentage?
Most professional traders risk between 1% and 2% of their account balance per trade. This allows them to survive strings of losses without significantly damaging their capital.
Does this work for Short selling?
Yes, the math for risk per share is the absolute difference between entry and stop loss, so it works for both long and short positions.
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