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Position Sizing Calculator

Calculate optimal position sizes based on portfolio value, risk tolerance, stop loss, and account risk percentage.

Position Sizing Calculator

Calculate optimal position sizes based on portfolio value, risk tolerance, stop loss, and account risk percentage.

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Guide

Using risk-based position sizing to manage portfolio risk

  • Position size = Account Risk Amount / Price Risk Percentage. This ensures losses are limited to your risk tolerance if stop loss is hit.
  • Account risk percentage (typically 1-2% per trade) determines how much of your portfolio you're willing to risk on a single position.
  • Price risk = |Entry Price - Stop Loss Price| / Entry Price. Tighter stop losses require smaller positions to limit risk.
  • Always use stop losses when position sizing. Position size should be inversely related to price risk—wider stops allow larger positions.
  • Consider correlation when sizing multiple positions. If positions are correlated, total risk exceeds the sum of individual position risks.

Frequently Asked Questions

Position sizing, risk management, and stop loss placement

What is position sizing?

Position sizing determines how much capital to allocate to a trade based on risk tolerance, stop loss placement, and portfolio value to limit potential losses.

Why is position sizing important?

Proper position sizing limits losses per trade, prevents over-concentration, and helps preserve capital during drawdowns. It's a key risk management tool.

What is account risk percentage?

Account risk percentage is the maximum percentage of portfolio value you're willing to risk on a single trade if the stop loss is hit. Common values are 1-2% per trade.

How do I set a stop loss?

Place stop loss below support levels (long) or above resistance (short), considering volatility. Stop loss should reflect your risk tolerance and trade setup, not arbitrary levels.

What if my calculated position is too large?

If position size exceeds your comfort level or portfolio constraints, either tighten the stop loss (increase price risk), reduce account risk percentage, or skip the trade.

Should I risk the same amount on every trade?

Consistent risk per trade (e.g., 1-2%) is a good default. Some traders adjust risk based on trade quality or market conditions, but consistency helps manage overall portfolio risk.

How does volatility affect position sizing?

Higher volatility requires wider stop losses or smaller positions to limit risk. Consider using ATR (Average True Range) or volatility-based stop loss placement.

What about position sizing for options?

For options, consider delta-adjusted position sizing and account for different risk profiles. Option positions can have asymmetric risk/reward compared to stocks.

How do I account for correlation?

If positions are correlated, total portfolio risk exceeds the sum of individual risks. Reduce position sizes or limit the number of correlated positions to manage overall exposure.

Should I recalculate position size after entry?

If you move stop loss (trailing stop) or price moves significantly, recalculate position size to maintain constant risk. Alternatively, adjust position size as price moves to maintain risk percentage.

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Position Sizing Calculator

Calculate optimal position sizes based on portfolio value, risk tolerance, stop loss, and account risk percentage.

How to use Position Sizing Calculator

Step-by-step guide to using the Position Sizing Calculator:

  1. Enter your values. Input the required values in the calculator form
  2. Calculate. The calculator will automatically compute and display your results
  3. Review results. Review the calculated results and any additional information provided

Frequently asked questions

How do I use the Position Sizing Calculator?

Simply enter your values in the input fields and the calculator will automatically compute the results. The Position Sizing Calculator is designed to be user-friendly and provide instant calculations.

Is the Position Sizing Calculator free to use?

Yes, the Position Sizing Calculator is completely free to use. No registration or payment is required.

Can I use this calculator on mobile devices?

Yes, the Position Sizing Calculator is fully responsive and works perfectly on mobile phones, tablets, and desktop computers.

Are the results from Position Sizing Calculator accurate?

Yes, our calculators use standard formulas and are regularly tested for accuracy. However, results should be used for informational purposes and not as a substitute for professional advice.