Position Size Calculator: The Formula, Explained

If you've searched for a position size calculator, you're already doing the thing most traders skip: sizing trades on purpose instead of by feel. Here's the formula behind every position size calculator worth using, why it works, and where most people get it wrong.

The formula

Every good position size calculator runs on the same three inputs:

• Account equity — your total trading capital
• Risk percentage — how much of that you're willing to lose on this one trade, usually 0.5–2%
• Stop distance — the difference between your entry price and your stop-loss price

The math:

Position size = (Account equity × Risk %) ÷ Stop distance

That's it. Everything else is detail.

A worked example

Say you have a $10,000 account and you're risking 1% per trade — $100. You want to buy a stock at $50, and your stop-loss is at $48, a $2 stop distance.

$100 ÷ $2 = 50 shares.

That's your position size. Not "felt like a good amount," not "what I usually buy" — a number produced by your risk tolerance and the trade's actual structure.

Where most people get it wrong

1. Sizing by dollars, not risk

"I'll put $500 into this" tells you nothing about risk. Two $500 positions can carry wildly different risk depending on where the stop sits. Dollar amount is an output of the calculation, never an input.

2. Picking the stop after deciding the size

If you decide "I'm buying 100 shares" and then look for a stop that fits, you've reversed the formula. The stop comes from the chart — the price level that proves your idea wrong — not from what size you already wanted.

3. Ignoring risk percentage entirely

Risking 10% or 20% on a single trade because "this one feels right" is how small accounts blow up. 0.5–2% per trade is the range most professional discretionary traders actually use, precisely because no single loss should be able to hurt you enough to matter.

Why this matters more than the entry

Most new traders spend all their time looking for the perfect entry and none on this calculation. But position sizing is the one part of a trade you fully control before you even click buy. Get it right and no single trade can seriously damage your account. Get it wrong and even a good strategy can ruin you through bad sizing alone.

Do the math every time, not just when you remember

A position size calculator you actually use beats a formula you know but skip under pressure. Our free calculator runs this exact formula — enter your balance, risk %, entry, and stop, and it does the division for you. If you want it built into your workflow permanently, Risk Console does the same calculation live as you type, with risk:reward included.

Either way: risk first, size second, always.