Position Sizing for Beginners: Risk Percent Calculator

What Is Position Sizing and Risk Percent?

Position sizing is deciding how many shares, contracts, or units to buy or sell on a trade. The risk percent method limits the dollar amount you are willing to lose on a single trade to a fixed percentage of your account (for example, 1%). A stop-loss is the exit price that defines where the trade is proven wrong.

By pairing a fixed risk percent with a defined stop-loss, your position size adapts to the market: tighter stops allow larger size; wider stops reduce size. This keeps losses consistent across trades and helps prevent one bad trade from dominating your results.

How to Calculate Position Size (Step by Step)

1. Choose your risk percent. Many beginners start small (for example, 0.5%–1% of account).
2. Define your entry price and stop-loss price. Your stop should reflect where your trade thesis is invalidated.
3. Measure stop distance. This is the difference between entry and stop in price terms.
4. Convert account risk into units. Take the dollars you’re risking (account size × risk percent) and split it by the stop distance to find how many shares or units to trade. Round down to stay within risk.
5. Account for frictions. Consider slippage and fees by trimming size slightly, especially in thin or fast markets.

Inputs a Risk Percent Calculator Uses

• Account size and chosen risk percent
• Entry price and stop-loss price
• Instrument specifics (share, contract, or lot value; multipliers for futures/FX)
• Optional buffer for slippage/fees

For volatility-aware stops, some traders size around a stop set with Average True Range (ATR), a measure of typical price movement. If you’re new to ATR, see ATR simply explained.

Two Quick Examples

Example 1: Stock, Intraday Breakout

Account: $10,000. Risk percent: 1% ($100 risk). Plan to buy at $50 with a stop at $49.60. Stop distance is $0.40. You can risk $100 across $0.40 of price movement, so you take 250 shares (100 ÷ 0.40 = 250). To allow for small slippage/fees, you might round down to 240–245 shares.

Example 2: Swing Trade with a Volatility Stop

Account: $25,000. Risk percent: 0.8% ($200 risk). Entry at $80. You set a stop one ATR below your entry, estimated $1.20 away. With $200 of allowed risk across $1.20, you would take about 160 shares. If the chart is thin or spreads are wide, reduce to ~150 shares.

Notice how the wider stop in Example 2 leads to fewer shares. The risk percent stays constant; the position size flexes with the stop distance.

Pitfalls and Quick Tips

• Stops too tight: A tiny stop can look attractive but may reflect noise, not your thesis. Place stops where the setup fails, not at arbitrary levels.
• Ignoring volatility: When price swings are larger, your stop needs room. Wider stops mean smaller size—by design.
• Changing risk after losses: Keep your risk percent consistent to avoid emotional decision-making.
• Liquidity and slippage: Thin markets can move through your stop. Trade smaller and use limits where appropriate.
• Leverage awareness: Margin increases notional size but not your risk budget. Size from risk, then check margin requirements and max allowable units.
• Plan before entry: Decide entry, stop, target, and size before you click. If any piece is unclear, skip the trade.