How position sizing works
Position sizing starts from the loss, not the gain. You decide how much of your account you are prepared to lose if the trade goes wrong, put your stop where the trade idea stops making sense, and let the distance between the two set the size.
Amount at risk = Account × Risk % Position size (shares or coins) = Amount at risk ÷ |Entry − Stop|
A wider stop means a smaller position; a tighter stop means a larger one. Either way, a stopped-out trade costs the same amount, which is what keeps one bad trade from doing outsized damage.
Tip: set your stop where the trade idea stops making sense, then let the calculator size the position. Moving the stop closer just to buy more shares defeats the point.
Worked example
Your account is $10,000 and you risk 1% per trade. You want to buy at $50 with a stop at $48.
- Amount at risk: 10,000 × 1% = $100.
- Risk per share: 50 − 48 = $2.
- Shares: 100 ÷ 2 = 50 shares, a $2,500 position (25% of the account).
- If the stop fills at $48, you lose 50 × 2 = $100. A move to $54 (2R) would make $200.
Shorts, fees and slippage
For a short, the stop sits above the entry and the maths is the same. Fees and slippage make the real loss bigger than the price distance alone, so the calculator takes them off the budget first: Shares = (Amount at risk − Fees) ÷ (|Entry − Stop| + Slippage). Then it rounds down to whole shares (or your crypto step), so the actual risk never goes over what you set.
When the stop is very tight
A tight stop can produce a position bigger than your account: $100 of risk on a $0.10 stop at $100 a share is 1,000 shares, or $100,000. The calculator caps the size at account × max leverage (1× for a cash account) and tells you when that happens, along with the smaller risk you are actually taking.
Reward-to-risk and R-multiples
Traders measure outcomes in R, the amount risked. A take profit twice as far from the entry as the stop is a 2R target. Add a take profit to see the ratio, or use the 1R, 2R and 3R levels in the results. They are arithmetic, not predictions: they show what a move would be worth, not whether it will happen.
Common mistakes
- Choosing the size first and the stop second. Then the stop goes wherever the loss feels bearable, not where the trade idea fails.
- Rounding up. 466.7 shares should be 466, or you are over your risk.
- Ignoring gaps. A stop is an instruction, not a guarantee. A stock that opens far below your stop fills at the open.
- Sizing on a balance you don't have. Use the account value you would actually trade from.
Assumptions
How this calculator works. The stop is assumed to fill at the stop price plus the slippage you enter; real fills can be worse after a gap. Fees are one round-trip amount. Units are rounded down to the step you choose. The position is capped at account × max leverage. Margin interest and borrow costs are not included.
