What this tool does
The Position Sizing Calculator helps traders determine exactly how many shares or units to buy on any given trade so that a single losing trade never exceeds a predetermined percentage of their account. Rather than guessing how much to invest, you enter your total account balance, the percentage you are willing to risk, and the distance between your planned entry price and your stop-loss price. The calculator then returns the maximum number of shares you can purchase while staying within your risk budget. It also shows the total dollar value of the position, the dollar amount at risk, and the percentage of your portfolio consumed by the trade. If you provide an optional take-profit target, the tool will compute your risk-to-reward ratio and potential profit, giving you a complete picture of the trade before you place it. A built-in risk gauge classifies your chosen risk percentage as conservative, moderate, or aggressive, so you can quickly calibrate your approach.
How it calculates
The calculator uses five core formulas that build on each other. First, it multiplies your account balance by your chosen risk percentage to find your Risk Amount -- the maximum dollars you are willing to lose on the trade. For example, 2% of a \$50,000 account yields a \$1,000 risk budget. Second, it calculates the Risk Per Share by subtracting the stop-loss price from the entry price; this is the dollar amount you stand to lose on each individual share if the stop-loss is triggered. Third, it divides the Risk Amount by the Risk Per Share and rounds down to a whole number to produce the Position Size, ensuring you never exceed your risk limit. Fourth, it multiplies the position size by the entry price to get the total Position Value. Fifth, it divides the position value by the account balance and multiplies by 100 to express the position as a percentage of your portfolio. When a take-profit price is supplied, the tool also computes the reward per share (take-profit minus entry) and divides that by the risk per share to produce the risk-to-reward ratio. A ratio of 2:1 or higher is generally considered favorable, as it means the potential gain is at least twice the potential loss.
Who should use this
This calculator is built for anyone who trades stocks, ETFs, futures, forex, or cryptocurrency and wants a disciplined approach to risk management. Active day traders use it before every trade to ensure consistent position sizing across different price levels and volatility environments. Swing traders use it to plan entries before the market opens, plugging in key support levels as stop-loss targets. Long-term investors can use it when adding to positions to make sure a single stock does not become an outsized portion of their portfolio. Beginners benefit from the risk gauge, which provides immediate visual feedback on whether their risk percentage is within accepted professional guidelines. Financial educators and trading mentors can point students to this tool as a practical lesson in the math behind proper trade management.
Worked examples
Example 1 -- Stock swing trade: You have a \$50,000 trading account and want to risk no more than 2% per trade. You plan to buy shares of a stock at \$150 with a stop-loss at \$142. Risk Amount = \$50,000 x 0.02 = \$1,000. Risk Per Share = \$150 - \$142 = \$8. Position Size = \$1,000 / \$8 = 125 shares. Position Value = 125 x \$150 = \$18,750. Position as % of Portfolio = \$18,750 / \$50,000 x 100 = 37.5%. If your take-profit target is \$170, the reward per share is \$20, giving a risk-to-reward ratio of 20/8 = 2.5:1 and a potential profit of 125 x \$20 = \$2,500.
Example 2 -- Small account day trade: You have a \$10,000 account and want to risk 1% per trade. Entry at \$25, stop-loss at \$24.50. Risk Amount = \$10,000 x 0.01 = \$100. Risk Per Share = \$25 - \$24.50 = \$0.50. Position Size = \$100 / \$0.50 = 200 shares. Position Value = 200 x \$25 = \$5,000, which is 50% of the account. The tight stop allows a larger share count, but the position still only risks \$100 -- exactly 1% of the account. If your take-profit is \$26, the risk-to-reward ratio is \$1.00/\$0.50 = 2:1 and potential profit is \$200.
Example 3 -- Conservative approach: A \$100,000 portfolio with 0.5% risk. Entry at \$500, stop-loss at \$475. Risk Amount = \$500. Risk Per Share = \$25. Position Size = 20 shares. Position Value = \$10,000, or 10% of the portfolio. This conservative setting limits both the dollar risk and the portfolio concentration.
Limitations
The calculator rounds position size down to whole shares, which means the actual risk may be slightly less than the target. It does not account for trading commissions, bid-ask spreads, or slippage, all of which add to the effective cost of a trade. Stop-loss orders are not guaranteed to execute at the exact price in fast-moving or gapping markets, so real losses can exceed the calculated risk. The tool assumes a single entry at one price and does not handle scaling into a position across multiple price levels. It does not factor in margin, leverage, or buying-power constraints imposed by your broker. Correlations between positions are ignored -- holding several highly correlated trades at the same time effectively multiplies overall portfolio risk even if each individual trade stays within the risk budget. This calculator is an educational tool and does not constitute financial advice.
FAQs
Q: What is the recommended risk percentage per trade? A: Most professional traders risk between 0.5% and 2% of their account on any single trade. The popular "2% rule" means that even a string of ten consecutive losses would only draw down the account by roughly 20%, leaving enough capital to recover. More conservative traders, especially those with larger accounts, often risk 0.5% to 1%.
Q: Does this calculator work for short trades? A: Yes. For a short position, the stop-loss price is above the entry price. The calculator uses the absolute difference between entry and stop-loss, so it works equally well for long and short trades.
Q: What is a good risk-to-reward ratio? A: Many traders look for a minimum of 1:2, meaning the potential reward is at least twice the potential loss. A 1:3 ratio is considered excellent. Even with a win rate below 50%, a consistently high risk-to-reward ratio can produce overall profitability.
Q: Why does the calculator round down the position size? A: Rounding down ensures that your actual dollar risk never exceeds your target risk amount. Rounding up could push you slightly over your risk budget on every trade, which compounds over time.
Q: Can I use this for forex or crypto? A: Yes. Enter the price per unit for your instrument (e.g., the exchange rate for a forex pair or the price of one coin) along with your stop-loss level. The math is the same regardless of asset class. Just be aware that leverage and lot-size conventions in forex may require additional calculations beyond what this tool provides.
Explore Similar Tools
Explore more tools like this one:
- Car Audio Power Wire Sizing Calculator — Calculate required wire gauge (AWG) for car amplifiers... - Generator Sizing Calculator — Select your appliances and calculate the total starting... - HVAC Sizing Calculator — Estimate required heating and cooling capacity (BTUs)... - Quartile Calculator – IQR Calculator — Calculate quartiles (Q1, Q2, Q3) and interquartile range... - Acreage Calculator — Calculate land area in acres from dimensions in feet,...