How to Calculate Position Size

Overview

Proper position sizing is the single most important risk management skill. Learn the formula, automate it, and never risk more than you can afford to lose on any single trade. Use our position size calculator to run the numbers instantly before every entry. Pair position sizing with the risk-reward calculator to ensure every trade offers a favourable payoff ratio. For a deeper look at protecting your capital, browse our full library of how-to guides on risk management.

Steps

1. 1Determine your account equity and maximum risk percentage (typically 1-2%).
2. 2Calculate dollar risk: account equity × risk percentage = risk amount.
3. 3Find your stop-loss distance: entry price − stop-loss price = risk per unit.
4. 4Position size = dollar risk / risk per unit.
5. 5For forex: position size in lots = dollar risk / (stop-loss in pips × pip value).
6. 6Double-check by verifying: if the stop-loss hits, you lose exactly your risk amount.

Pro Tips

• Use a position size calculator (our Tools section has one) instead of doing mental maths.
• Reduce position size by 50% during drawdowns or high-volatility events.
• For correlated positions (e.g., multiple tech stocks), count them as one combined position for risk purposes.