What is position sizing in trading?
Position sizing is the calculation of how many shares (or contracts) to trade based on account size, risk percentage per trade, and stop-loss distance. The standard formula: Position size = (Account × Risk%) ÷ (Entry − Stop). Most disciplined traders risk 0.5-2% of account per trade.
More detail
Without proper position sizing, even a strategy with positive expectancy can blow up an account.
Risk-percentage-based sizing keeps dollar risk constant regardless of the asset's volatility or price.
Use our position size calculator to compute exact shares for any setup.