Position Size Calculator

Position Size Calculator

Calculate your trade size based on risk management principles.

Trade Results

Recommended Position Size: 0 Units/Shares

Total Cash Risked: $0.00

Risk Per Share: 0.00

Total Notional Value: $0.00

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Understanding Position Sizing in Trading

Position sizing is the most critical component of risk management for traders and investors. It determines how many units, shares, or contracts a trader should take on a single trade to ensure that a potential loss does not catastrophically impact the total account balance.

Why Position Sizing Matters

Many novice traders focus entirely on "where to buy" or "where to sell." However, professional trading is built on survival. By calculating your position size correctly, you ensure that even if you face a losing streak, your account remains intact. A standard rule of thumb is to never risk more than 1% to 2% of your total account equity on a single trade.

The Position Size Formula

The calculation follows a specific mathematical logic to bridge the gap between your risk tolerance and the market's volatility (represented by your stop loss distance):

Position Size = (Account Balance × Risk %) / (Entry Price – Stop Loss Price)

Practical Example

Suppose you have an Account Balance of $10,000 and you decide to risk 1% ($100 risk). You want to buy a stock at $150.00 (Entry Price) and place your exit for a loss at $145.00 (Stop Loss Price).

• Risk Amount: $10,000 * 0.01 = $100
• Risk Per Share: $150.00 – $145.00 = $5.00
• Position Size: $100 / $5.00 = 20 Shares

In this scenario, if the stock hits your stop loss at $145, you lose exactly $100, which is your intended 1% risk.

Key Terms to Know

• Account Balance: The total liquid capital available in your trading account.
• Risk Percentage: The portion of your total account you are willing to lose if the trade fails.
• Stop Loss: A predetermined price point where you will exit the trade to prevent further losses.
• Notional Value: The total value of the position (Position Size × Entry Price).

function calculatePositionSize() { var balance = parseFloat(document.getElementById('accountBalance').value); var riskPct = parseFloat(document.getElementById('riskPercentage').value); var entry = parseFloat(document.getElementById('entryPrice').value); var stopLoss = parseFloat(document.getElementById('stopLossPrice').value); // Validation if (isNaN(balance) || isNaN(riskPct) || isNaN(entry) || isNaN(stopLoss)) { alert("Please enter valid numeric values in all fields."); return; } if (entry === stopLoss) { alert("Entry price and Stop Loss cannot be the same."); return; } // Calculation Logic var riskAmount = balance * (riskPct / 100); var riskPerShare = Math.abs(entry – stopLoss); var units = riskAmount / riskPerShare; var notionalValue = units * entry; // Update UI document.getElementById('resUnits').innerText = units.toLocaleString(undefined, {minimumFractionDigits: 0, maximumFractionDigits: 4}); document.getElementById('resRiskAmount').innerText = "$" + riskAmount.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2}); document.getElementById('resRiskPerShare').innerText = riskPerShare.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 4}); document.getElementById('resNotionalValue').innerText = "$" + notionalValue.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2}); // Show Results document.getElementById('positionResult').style.display = 'block'; }