Steps to calculate position size
- Set your risk per trade. Usually a percentage of capital (e.g. 1%). Risk amount = Capital × Risk %.
- Define entry and stop loss. The distance between them is how much you lose per unit if the stop is hit.
- Compute quantity. Quantity = Risk amount / Stop distance per unit. If price hits the stop, your loss equals the risk amount.
- Check position value. Position value = Quantity × Entry. For spot, ensure you have enough capital; for futures, check margin and leverage.
Quantity = Risk amount ÷ |Entry − Stop loss| (per unit)
Worked example
Example
Capital: $10,000. Risk: 1% = $100. Long at $50,000, stop at $49,000. Stop distance = $1,000 per unit. Quantity = $100 / $1,000 = 0.1. Position value = 0.1 × $50,000 = $5,000. If price drops to $49,000, you lose $100. Use a position size calculator to do this for any pair and add take-profits.
Get position size from entry, stop and risk % in one click.
Common mistakes
Common mistake
- Using a fixed lot size for every trade instead of sizing by risk.
- Ignoring fees, so gross profit looks good but net is much lower.
- Setting stop too close and getting stopped out by noise, or too far and risking too much.
FAQ
- What formula is used for position size?
- Quantity = Risk amount / |Entry - Stop loss| (per unit). So risk amount divided by the stop distance per unit. The calculator does this for you once you enter capital, risk %, entry and stop.
- Should I use percentage or fixed dollar risk?
- Percentage of capital is common (e.g. 1% per trade) so position size scales with account size. Fixed dollar risk is possible but does not adapt as your capital changes.
- What if my stop is very tight?
- A tight stop means a small denominator, so quantity can get large. Ensure your exchange allows that size and that slippage does not make your real stop worse than planned.
- Can I use this for stocks and crypto?
- Yes. The same logic applies: risk amount and stop distance in the same units (e.g. USD per share or per coin). Use a position size calculator that supports your market.