How to Calculate Position Size

Position size is the answer to the right question

The 1% rule tells you the dollars you are willing to lose. Position sizing turns that dollar amount into the actual number of shares you buy. Without it, the rule is just a number on paper. The question was never how much you want to make. It is how much you lose if the trade does not work. Get the size right and a bad trade costs you exactly what you planned. Get it wrong and one good-looking setup can take a chunk out of the account before anything else goes wrong.

The three steps

Three steps turn the rule into a number of shares.

• Find your risk per trade. Multiply your account size by 0.01 for 1%. A $10,000 account gives you $100.
• Mark your entry and stop from structure. Your entry is where you buy. Your stop is the price that proves the trade wrong. The gap between them is your risk per share.
• Divide. Risk per trade divided by risk per share is your number of shares.

A worked example

Say you risk $100, enter at $20, and place your stop at $19. Your risk per share is $20 minus $19, which is $1. Divide your $100 risk by the $1 per share and you get 100 shares. If the trade hits your stop, you lose the $100 you planned, no more. The position is sized to the loss, not to the target.

Use the same percentage every trade for now

This is fixed risk. Every trade gets the same percentage, no matter how good the setup looks. Some traders run 1%, others 0.5% for more room. At 1% it takes roughly 100 losses in a row to wipe the account, at 0.5% roughly 200. Those numbers are rough, but they show how much room each level buys. Adjusting risk by setup quality is a later step. For now, hold it at one number so your sizing stays consistent.

Let a tool do the division

You do not have to do the third step by hand. A charting position tool sizes it when you drag it to your entry and your stop. The position size calculator inside Trader Dashboard does the same when you type in your entry and stop, so the share count is correct every time.

Common mistakes

• Sizing to the target. The number of shares comes from your stop distance and your risk, not from how much you hope to make.
• Picking the stop to fit a share count. The stop comes from structure first. The shares follow from it, not the other way around.
• Ignoring how a tight stop scales the position. A small stop distance produces a large share count. The dollar risk is the same, but the position can move fast, so know the notional you are holding.

Frequently asked questions

What is the position size formula?

Shares = risk per trade divided by stop distance, where stop distance is the entry price minus the stop price. If you risk $100 and your stop is $1 below entry, you buy 100 shares.

How do I size a trade using the 1% rule?

First find 1% of your account, which is your risk per trade. Then mark your entry and stop from structure to get your risk per share. Then divide your risk per trade by your risk per share to get the number of shares.

What happens if my stop is very tight?

A tighter stop means a smaller risk per share, so the formula gives you more shares for the same dollar risk. Your dollar risk stays the same, but your position is larger and moves faster.

Should position size change with how confident I feel?

For now, keep the same percentage on every trade. Adjusting size by setup quality is a later step that only works once your setup grades are clearly defined and tested.