How to Calculate Position Size for a Trade
Learn how to size a trade so a stop-loss costs only what you're willing to risk, how reward-to-risk and win rate fit in, with a free position size calculator.
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Free tool: Position Size CalculatorHow many shares should you buy? Most traders start from what they want to make. Position sizing starts from what you're willing to lose: you decide your risk first, then the size follows from where your stop-loss sits. This guide shows the method, using the free Position Size Calculator.
The formula
- Risk budget = account size × risk per trade (often 1% or 2%)
- Risk per share = entry price − stop-loss price
- Shares = risk budget ÷ risk per share
Example: a $25,000 account risking 1% ($250) per trade, buying at $50 with a stop-loss at $47.50:
- Risk per share: $2.50
- Shares: $250 ÷ $2.50 = 100 shares
- Position: $5,000, or 20% of the account
If the stop is hit, you lose $250, 1% of the account, whatever the stock does.
Tighter stops mean bigger positions
Moving the stop to $49.50 cuts the risk per share to $0.50, so the same $250 budget buys 500 shares, a $25,000 position that uses the entire account. That's why a position cap matters: the calculator lets you limit the largest position as a share of the account, and 100% means no leverage.
Reward-to-risk and win rate
With a target of $56, the trade could make $6 a share, $600 on 100 shares, against $250 of risk: a 2.4 to 1 reward-to-risk ratio. At that ratio, you break even over many trades if you win just 29.4% of the time:
Break-even win rate = 1 ÷ (1 + reward-to-risk)
Trades with low reward-to-risk need a high win rate to pay off, which is hard to sustain.
Choosing your risk per trade
| Risk per trade | Shares | Position | Money at risk |
|---|---|---|---|
| 0.5% | 50 | $2,500 | $125 |
| 1% | 100 | $5,000 | $250 |
| 2% | 200 | $10,000 | $500 |
Risking 1% to 2% per trade means a string of ten losses costs roughly 10% to 18% of the account, which is survivable. Risking 5% or more can wipe out half the account in a bad streak.
Stops aren't guaranteed: a stock can gap past your stop overnight, so real losses can exceed the plan.
How to use the Position Size Calculator
- Open the Position Size Calculator.
- Enter your account size and risk per trade, as a percentage or a dollar amount.
- Enter the entry price and the stop-loss price. A stop below the entry is a long trade; above it is a short.
- Optionally enter a target price, the largest position you allow, and whether fractional shares are allowed.
- Read the results: the number of shares, the money at risk, the position value, the risk per share, the reward-to-risk ratio and the break-even win rate, with a profit-or-loss chart by exit price and a table of sizes at different risk levels.
Frequently asked questions
How do I calculate position size?
Divide the amount you're willing to lose by the distance from entry to stop. Risking $250 with a $2.50 stop distance means 100 shares.
How much should I risk per trade?
Many traders risk 1% to 2% of their account per trade, so a losing streak doesn't do lasting damage.
What is a good reward-to-risk ratio?
Many traders look for at least 2 to 1. At 2.4 to 1, as in the example, you only need to win about 29% of trades to break even.