How to use the position size calculator
The page has three tools. By risk is the classic method for traders: it finds the number of shares that loses a fixed amount if the stop-loss is hit. By capital sizes from a budget, with a cap on how much of the account any one stock can take. Risk per trade works the other way round, from a number of shares to the money at risk.
- Choose long or short. For a long trade the stop sits below the entry; for a short sale it sits above.
- Enter the entry price and the stop-loss price. Put the stop where the trade idea is proven wrong, such as below a support level, not where the loss feels comfortable. Our stop-loss calculator helps place it from a percentage or from the stock’s ATR.
- Enter the account balance and the risk. Risk can be a percentage of the account or a fixed dollar amount.
The result is the number of shares, rounded down so the loss never exceeds your limit, together with the position value, its share of the account and the actual dollar risk after rounding.
The position sizing formula
Risk per share = |Entry price − Stop price|
Shares = Money at risk ÷ Risk per share, rounded downThe position value is Shares × Entry price. The actual risk is Shares × Risk per share, which is at or slightly below the money at risk because of the rounding.
Sizing by capital is simpler:
A worked example
You have a $25,000 account and accept a loss of 1% on any trade, which is $250.00. You plan to buy at $48.40 with a stop at $46.10, so each share can lose $2.30.
$250.00 ÷ $2.30 is 108.70 shares. Rounded down, you buy 108 shares, a position worth $5,227.20, or 20.9% of the account. If the stop is hit you lose $248.40.
A short sale works the same way. Selling short at $30 with a stop at $31.25 and $400 at risk gives 320 shares, worth $9,600.00.
The stop decides the size, not the other way round
The money at risk stays fixed; the stop distance changes how much stock that money buys. For the same $25,000 account risking 1% with an entry at $48.40:
| Stop price | Risk per share | Shares | Position value | Share of account |
|---|---|---|---|---|
| $43.60 | $4.80 | 52 shares | $2,516.80 | 10.1% |
| $46.10 | $2.30 | 108 shares | $5,227.20 | 20.9% |
| $47.90 | $0.50 | 500 shares | $24,200.00 | 96.8% |
All three trades lose about the same money if they fail. The tight stop simply needs a much larger position to make that loss possible, which is why the chart on the “By risk” tab rises so steeply on the left. A stop placed very close to the entry also gets hit more often by ordinary price noise, so a tighter stop is not automatically a safer trade.
Choosing the risk per trade
The percentage you risk sets how fast the account shrinks in a losing streak. With the example entry and stop:
| Risk per trade | Money at risk | Shares | Position value |
|---|---|---|---|
| 0.5% | $125.00 | 54 shares | $2,613.60 |
| 1% | $250.00 | 108 shares | $5,227.20 |
| 2% | $500.00 | 217 shares | $10,502.80 |
Losing streaks are normal even for a profitable strategy. At 1% per trade, ten losses in a row cost about 9.6% of the account; at 3% they cost about 26%. Sizing by a percentage also scales automatically: after losses the dollar risk shrinks, after gains it grows. A fixed dollar amount keeps the risk constant instead. The risk of ruin calculator shows how the choice affects the odds of a deep drawdown.
Sizing by capital and position limits
Long-term investors often size by money rather than by a stop: put a set amount into each stock, but never more than a fixed share of the account. In the example, $6,000 is more than the 20% cap allows, so the calculator limits the budget to $5,000.00 and buys 103 shares. With $3,000 the cap does not bind and the position is 61 shares.
A 20% cap means the account holds at least five positions; a 5% cap, at least twenty. The limit protects against a single company’s bad news, which a stop-loss cannot always do, because shares can open far below the stop after an earnings report.
Checking the risk on a position you already hold
The Risk per trade tab answers the reverse question. Holding 150 shares bought at $48.40 with a stop at $46.10 puts $345.00 at risk, which is 1.38% of the account. To bring that down to 1% with the same stop, you would hold 108 shares.
What this calculator does not include
- Gaps and slippage. A stop-loss becomes a market order when triggered. If the stock opens below the stop, the fill and the loss can be much worse than planned.
- Commissions and spreads, which add to the loss on every trade. See the trading cost calculator.
- Margin costs and limits. When the position is larger than the account, the calculator warns you but does not check your broker’s buying power or margin interest. The leverage and margin calculator covers that.
- Correlation. Five positions in the same sector, each risking 1%, can behave like one position risking 5%.
- Fractional shares. The calculator rounds down to whole shares; some brokers allow fractions.