Position Size Calculator

Calculate optimal trade size for stocks and ETFs using multiple risk management methods

Calculate Position Size

% Risk
Fixed $
Kelly
ATR
$
$
%
$
$
$
Note: Kelly Criterion can suggest aggressive position sizes. Consider using "Half Kelly" (50%) for more conservative sizing.
%
$
$
$
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Position Size

100 shares

$5,000.00 total value

$200.00
Risk Amount
50.00%
Portfolio %
1:2.50
Risk:Reward
Good R:R Potential profit: $500.00
With a 1:2.5 R:R, you need 29% win rate to break even.
Conservative Moderate Aggressive

Position represents 50% of portfolio. Consider if this aligns with your risk tolerance.

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How Position Sizing Protects Your Trading Capital

Position sizing is the most critical yet overlooked aspect of trading. While most traders focus on entry signals, professional traders know that how much you trade matters more than what you trade. Proper position sizing ensures no single trade can devastate your account.

The Four Position Sizing Methods

Percentage Risk

Risk a fixed percentage (1-2%) of your account per trade. Most popular method for consistent risk management.

Size = (Account × Risk%) / (Entry - Stop)

Fixed Dollar

Risk the same dollar amount on every trade. Simple but doesn't scale with account growth.

Size = Fixed $ Risk / (Entry - Stop)

Kelly Criterion

Mathematically optimal sizing based on win rate and payoff ratio. Use Half Kelly for safety.

Kelly% = W - [(1-W) / R]

ATR Volatility

Adapts position size to current market volatility using Average True Range for stops.

Size = Risk $ / (ATR × Multiplier)

The 2% Rule Explained

The 2% rule states you should never risk more than 2% of your trading capital on a single trade. Here's why it works:

Consecutive Losses 2% Risk (Account Left) 5% Risk (Account Left) 10% Risk (Account Left)
5 losses90.4%77.4%59.0%
10 losses81.7%59.9%34.9%
20 losses66.8%35.8%12.2%

Understanding Risk-to-Reward Ratios

Your risk-to-reward (R:R) ratio determines how often you need to win to be profitable:

R:R Ratio Break-Even Win Rate Quality
1:150%Minimum
1:233%Good
1:325%Excellent
1:517%Outstanding
Pro Tip: Combine position sizing with quality stock predictions. SharePreds provides ML-based predictions to help you identify high-probability trades worth sizing into.

Frequently Asked Questions

To calculate position size: Position Size = Risk Amount / (Entry Price - Stop Loss Price). For example, with a $10,000 account risking 2% ($200), entry at $50 and stop loss at $48, position size = $200 / $2 = 100 shares. This ensures you only lose your predetermined risk amount if stopped out.

The 2% rule is a risk management guideline where traders never risk more than 2% of their total trading account on a single trade. If you have a $50,000 account, you would risk maximum $1,000 per trade. This protects your capital from significant drawdowns during losing streaks.

Kelly Criterion is a mathematical formula for optimal bet sizing: Kelly % = (Win Rate × Average Win - Loss Rate × Average Loss) / Average Win. It maximizes long-term growth but can suggest aggressive sizes. Most traders use 'Half Kelly' (50% of suggested size) for more conservative risk management.

ATR (Average True Range) position sizing uses volatility to set stop losses and position sizes. Formula: Position Size = Risk Amount / (ATR × Multiplier). For example, with $200 risk and ATR of $2 using 2× multiplier: Position = $200 / ($2 × 2) = 50 shares. This adapts your position to market volatility.

A minimum 1:2 risk-to-reward ratio is recommended, meaning you target $2 profit for every $1 risked. This allows you to be profitable even with a 40% win rate. Professional traders often seek 1:3 or higher ratios. The R:R ratio helps evaluate if a trade setup is worth taking.

Most experienced traders recommend Half Kelly (50% of the Kelly percentage). Full Kelly maximizes theoretical growth but leads to larger drawdowns and requires precise win rate/payoff estimates. Half Kelly provides 75% of the growth with significantly less volatility and is more forgiving of estimation errors.

Most risk management guidelines suggest limiting single stock exposure to 5-10% of your portfolio. Conservative investors may use 3-5%, while aggressive traders might go up to 15-20%. This calculator shows portfolio percentage to help ensure your trade size aligns with diversification goals.
Related Tool: Options Profit Calculator

Calculate potential profits and losses for options positions.

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Disclaimer: This calculator is for educational purposes only. Position sizing calculations depend on accurate inputs and don't guarantee trading success. Always verify calculations and consider your risk tolerance before trading. Past performance doesn't guarantee future results.

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