How to use the position size calculator
- Enter your account size and the percent of it you accept risking on one trade.
- Enter your entry price and your stop price. A stop below the entry means a long trade, and above the entry means a short.
- Optionally enter a target price and the fees for the round trip.
- Read the number of shares, the position value, the loss if the stop is hit and the reward to risk ratio.
Formula
Amount at risk = account size x risk percent
Risk per share = |entry - stop|
Shares = (amount at risk - fees) / risk per share, rounded down
Reward to risk = |target - entry| / risk per share
This is only arithmetic that turns a risk limit into a share count. It does not say whether a trade is a good idea.
Worked example
With a $25,000 account risking 1%, the amount at risk is $250. An entry at $50 with a stop at $47.50 risks $2.50 a share, so you buy 100 shares, a position of $5,000, which is 20% of the account.
A target of $57.50 would give $750 of gain for a 3 to 1 reward to risk ratio. A stop at $47 risks $3 a share and gives 83 whole shares, or 83.3333 with fractional shares. Subtracting $10 of fees gives 96 shares at the original stop.
Why size by risk
Sizing a position by how much you could lose, rather than by how many shares you feel like buying, keeps any one loss to a known share of your account. A wider stop means fewer shares, and a tighter stop means more. The calculation is the same for a stock, an exchange traded fund or any asset you can buy in units.
What can go wrong
A stop order does not guarantee the exit price. A price can gap past it, and the loss will be larger than the plan. Spreads, slippage, taxes and margin requirements also matter. If the position costs more than your account, it needs borrowed money, which this tool flags. It is arithmetic only and is not investment advice or a recommendation to trade.
Related tools
Work out a gain or loss in the stock profit calculator, find the average cost of several buys in the stock average calculator, and compare returns with the ROI calculator.
Assumptions and limits
- The stop fills at the stop price. Gaps and slippage can make the real loss larger.
- Fees are a flat amount for the whole trade and are subtracted from the amount at risk.
- Shares are rounded down by default so that the risk never exceeds your limit.
- This is arithmetic, not investment advice.
Frequently asked questions
How do I calculate position size?
Multiply your account by the percent you will risk, then divide by the distance between your entry and your stop.
What percent of my account should I risk?
That is a personal decision. This tool does not suggest a figure. It just converts the percent you choose into a share count.
Does it work for short positions?
Yes. If the stop is above the entry the tool treats the trade as a short and uses the same risk math.
Why does the tool round down to whole shares?
So the risk never exceeds your limit. You can untick the box to see fractional shares.