Position Size Calculator

Position sizing is the process of determining how many units (or how much capital) to allocate to a single trade. It is arguably the most important aspect of risk management — more important than your entry signal, your indicator setup, or your market thesis.

The core idea is simple: your position size should be determined by your risk tolerance, not your conviction level. Even the best trade setups can fail, and proper position sizing ensures that a single loss does not significantly damage your account.

The calculation works backwards from your maximum acceptable loss. You decide how much you are willing to lose (the risk amount), determine where your stop loss will be (the stop distance), and then calculate the position size that limits your loss to exactly that amount.

The 1% rule is a widely-used risk management guideline: never risk more than 1% of your total account balance on a single trade. For a $10,000 account, your maximum loss per trade should be $100.

Why 1%? Because it protects you from ruin. Even with 10 consecutive losing trades (which happens more often than you think), you would only lose about 10% of your account. This leaves you with enough capital to recover. At 5% risk per trade, 10 losses would cost you nearly half your account.

Professional traders often risk even less — 0.25% to 0.5% per trade. Aggressive day traders might push to 2%. Going above 3% per trade is generally considered reckless for any systematic approach.