Position Size and Risk Calculator
Work backwards from what you are willing to lose. Enter your account, your risk tolerance and your stop, and get the share count that makes the maths work.
The trade
Decide the stop from the chart first. The share count is an output, never an input.
Below your entry.
Above your entry.
0.5% to 2% is the conventional range.
A concentration cap, independent of the stop.
Position size
250 shares
$10,000 at $40.00, risking $500 if the stop fills
Risk per share
$2.00
5.0% stop distance.
Total at risk
$500
1.00% of the account.
Position weight
20.0%
Within your cap.
Reward : risk
3.00 : 1
Break even at a 25% win rate.
At 3.00:1 you risk $500 to make $1,500. You can be wrong 75% of the time and still break even, which is the kind of margin that survives a bad month.
What 1.0% per trade survives
Consecutive losers, compounding down. This table is the entire argument for small position sizes.
| Losing streak | Account left | Drawdown | Gain needed to recover |
|---|---|---|---|
| 3 in a row | $48,515 | 3.0% | 3.1% |
| 5 in a row | $47,550 | 4.9% | 5.2% |
| 10 in a row | $45,219 | 9.6% | 10.6% |
| 15 in a row | $43,003 | 14.0% | 16.3% |
| 20 in a row | $40,895 | 18.2% | 22.3% |
The recovery column is the part people underestimate. Losses and gains are not symmetric: a 33% drawdown needs a 50% gain to undo, and a 50% drawdown needs 100%. Position sizing is what keeps you out of the range where the maths turns against you.
Key takeaways
- Position size is calculated as the dollar amount you are willing to risk divided by the per-share distance between your entry and your stop loss.
- Risking 1% of an account per trade means eleven consecutive losses still leave roughly 90% of the account intact, while risking 5% per trade leaves about 57%.
- The reward-to-risk ratio determines the win rate you need to break even: at 2:1 you need to be right only 33% of the time, at 1:1 you need 50%.
- A tight stop does not reduce risk on its own, it increases share count for the same dollar risk, which is why stop placement and position size must be decided together.
- Recovering from a drawdown requires a larger percentage gain than the loss that caused it: a 50% loss needs a 100% gain to get back to even.
Frequently asked questions
- How do you calculate position size for a trade?
- Divide the dollars you are willing to risk by the per-share risk. If you have a $50,000 account, risk 1% ($500) per trade, and your stop is $2 below your $40 entry, then $500 ÷ $2 = 250 shares, a $10,000 position. The share count falls out of the stop distance; you never pick it directly.
- How much should I risk per trade?
- Between 0.5% and 2% of account equity per trade is the standard range, and 1% is the common default. The reason is arithmetic rather than preference: at 1% risk, a ten-trade losing streak costs about 10% of the account and is fully recoverable, while at 5% risk the same streak costs about 40% and requires a 67% gain to get back to even.
- What is a good reward-to-risk ratio?
- At least 2:1, meaning your target is twice as far from your entry as your stop is. At 2:1 you only need to win 33% of the time to break even, which leaves real room for being wrong. Ratios below 1:1 require you to be right more than half the time just to stay flat, and very few people sustain that.
- Why does a tighter stop mean a bigger position?
- Because dollar risk is fixed by your risk percentage, not by the stop. Halving the stop distance halves the per-share risk, so the same dollar risk buys twice as many shares. The total amount you can lose is unchanged, but the position is larger and far more likely to be stopped out by ordinary noise. Stop distance should come from the chart, not from a desire to buy more shares.
- Does position sizing apply to long-term investing too?
- The stop-loss framing does not, but the concentration question does. A long-term investor should still ask what percentage of the portfolio a single company represents and what happens if that company goes to zero. The maximum position size field in this calculator answers that half of the question without requiring you to trade with stops.