Calculator Panel
Calculation Ready
Enter your values above and click Calculate.
What This Calculator Does
This calculator prevents blown-up trading accounts by telling you exactly how many shares to buy to keep trade risks within your risk limits.
How to Use This Calculator
Enter account size, target risk percentage (typically 1-2%), buy price, and stop price. Click Calculate to get optimal shares and allocated capital.
How the Calculation Works
The underlying math engine processes your inputs using exact formulas. This systematic approach ensures professional, institutional-grade calculation precision:
Mathematical Formula
Formula Legend:
- · Capital = Total investment account size.
- · Risk % = Percent of capital you are willing to lose per trade.
- · Entry Price = Price per share when buying stock.
- · Stop Price = Your exit trigger stop-loss price.
Practical Example
Suppose you have a $50,000 portfolio and risk 1% ($500) on a stock with an entry of $100 and a stop-loss at $95:
Step-by-Step Mathematical Walkthrough:
- 1 First, find max dollar risk: $50,000 account size * 1.0% = $500.00.
- 2 Second, find risk distance per share: $100.00 entry - $95.00 stop = $5.00.
- 3 Divide max dollar risk by risk per share: $500.00 / $5.00 = 100 shares.
- 4 Calculate capital to allocate: 100 shares * $100.00 = $10,000.00.
Important Assumptions & Notes
- Stop-loss is executed with minimal slippage.
- Account capital and prices are specified in the same currency.
Common Mistakes or Considerations
- Sizing positions based on intuition rather than mathematical risk rules.
- Confusing total allocated cash with actual money at risk in a trade.
Frequently Asked Questions
What is position sizing?
The process of determining how many shares or what percentage of capital to allocate to a single stock trade to manage portfolio risk.
How do I calculate position size based on account risk?
Determine how much total cash you are willing to lose on the trade (e.g., 1% of account). Divide that amount by the difference between your entry price and stop-loss price.
What is the 1% or 2% risk rule in stock trading?
A professional risk management rule stating that you should never risk more than 1% or 2% of your total account capital on any single trade.
Why is stop-loss placement critical for position sizing?
The stop-loss price determines your risk per share. A tighter stop-loss allows for a larger position size, while a wider stop-loss requires a smaller position size to keep risk constant.
How does position sizing protect my overall portfolio?
It ensures that even if a trade fails completely and hits your stop-loss, the loss to your total account value is tiny and easily recoverable.