How much should I risk per trade?

Most risk rules land between 0.5% and 2% of the account per trade. At 1%, a run of ten straight losses costs about 10% of the account, which is survivable. At 5%, the same run costs about 40%, which is where most accounts never recover. Pick the number you can lose ten times in a row without changing how you trade.

What is the difference between risk per trade and position size?

Risk per trade is the dollar amount you lose if the stop is hit. Position size is the total money in the trade. A tight stop lets you hold a large position for a small risk; a wide stop forces a small position for the same risk. The calculator converts one into the other.

Does position sizing change with the price of the stock?

Only through the stop distance. A $500 stock with a $10 stop and a $50 stock with a $1 stop both risk 2% per share, so for the same dollar risk you would hold ten times as many of the $50 shares, and the position value would be the same.

Why cap the position as a share of the account?

A very tight stop can produce a share count worth more than the whole account, or more than you would ever want in one name. The cap, 25% by default here, keeps a single trade from becoming the account. If the cap binds, the stop is too tight for the account size or the risk should come down.

Free Tool

Position size calculator

Shares to buy = (account size x risk per trade) / (entry price minus stop price). Risk 1% of a $10,000 account on a $50 stock with a $47.50 stop and you buy 40 shares, $2,000 in the trade, $100 at risk.

Account size$The money in the brokerage account you trade from.Risk per trade%The share of the account you accept losing on one trade. 1% is a common rule.Entry price$

Stop-loss as

Stop price$Where the trade is wrong. Below the entry for a long, above it for a short.Largest position allowed% of accountA ceiling so a tight stop cannot turn one trade into the whole account.

Result

40 shares

$2,000.00 in the trade, risking $100.00 (1.00% of the account) if the stop at $47.50 is hit.

Dollar risk allowed: $100.00
Risk per share (entry to stop): $2.50 (5.00%)
Shares: 40
Position value: $2,000.00 (20.0% of account)
Target at 1R / 2R / 3R: $52.50 / $55.00 / $57.50

A 2R target means the trade pays twice what it risks. At 2R you only need to win about one trade in three to break even.

How the formula works

Fixed-fractional sizing starts from the loss you are willing to take, not from the number of shares you would like to own. The account size times the risk percentage gives the dollar risk. The entry price minus the stop price gives the risk per share. Dividing one by the other gives the share count, rounded down.

Formula

dollar risk = account x risk%

risk per share = |entry - stop|

shares = floor(dollar risk / risk per share)

position value = shares x entry

Two things follow from this. First, the stop decides the size, so a stop placed where the trade is actually wrong matters more than any other input. Second, risk per trade and position value are different numbers: a 1% risk rule can mean a position worth 20% of the account when the stop is 5% away, and only 5% of the account when the stop is 20% away.

A worked example

Account $10,000, risk 1%, so $100 per trade. Entry $50, stop $47.50, so $2.50 per share. $100 divided by $2.50 is 40 shares, a $2,000 position, 20% of the account. If the stop is hit you lose $100. A 2R target sits at $55: 40 shares times $5 is $200. Move the stop to $49 and the same $100 buys 100 shares, a $5,000 position, half the account, which is where the position cap earns its place.

The two mistakes this prevents

Sizing by feel. Buying a round number of shares, or the same dollar amount every time, means the risk per trade swings with wherever the stop happens to be. Two traders with the same stop and the same account can carry five times each other's risk without noticing.

Moving the stop to fit the size. Deciding the share count first and then placing the stop wherever the risk math allows puts the stop somewhere the trade is not yet wrong. The order is always stop first, size second. Our piece on why position sizing separates traders who last from traders who do not goes through the math on a real losing streak.

Done for you

JorgAI runs this math on every trade, then places the stop with the order.

Set your risk per trade and your largest position once. The auto-trader sizes each buy from the distance to its stop, sends the stop-loss and profit target to your broker with the order, and logs the numbers it used. Your money stays in your own brokerage account.

Set up your rules See how automated stop-losses work

Free to start. A two-minute setup quiz builds your rules. Your money stays in your own brokerage account.

Questions people ask

How much should I risk per trade?: Most risk rules land between 0.5% and 2% of the account per trade. At 1%, a run of ten straight losses costs about 10% of the account, which is survivable. At 5%, the same run costs about 40%, which is where most accounts never recover. Pick the number you can lose ten times in a row without changing how you trade.
What is the difference between risk per trade and position size?: Risk per trade is the dollar amount you lose if the stop is hit. Position size is the total money in the trade. A tight stop lets you hold a large position for a small risk; a wide stop forces a small position for the same risk. The calculator converts one into the other.
Does position sizing change with the price of the stock?: Only through the stop distance. A $500 stock with a $10 stop and a $50 stock with a $1 stop both risk 2% per share, so for the same dollar risk you would hold ten times as many of the $50 shares, and the position value would be the same.
Why cap the position as a share of the account?: A very tight stop can produce a share count worth more than the whole account, or more than you would ever want in one name. The cap, 25% by default here, keeps a single trade from becoming the account. If the cap binds, the stop is too tight for the account size or the risk should come down.

Keep reading

These tools are for education. They do not know your account, your taxes or your broker's exact fees, and nothing here is investment advice. Trading involves risk of loss.

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