Article ¡ Risk

Position sizing: from risk to shares

Many traders pick a size first and a stop second. Try reversing the order: decide what you are willing to risk, place your stop where your idea is proven wrong, and let those numbers set your size.

Educational content only. Not financial advice. Updated October 28, 2026.

The idea

Position sizing answers one question: how many shares (or units) should I trade, given how much I am willing to lose if I'm wrong? Starting from the amount at risk, instead of from a number of shares you feel comfortable with, keeps the potential loss on each trade inside a limit you chose in advance.

The steps

  1. Set a risk budget per trade. Choose a percentage of your account you are willing to lose on one trade. Multiply it by your account equity.
  2. Measure risk per share. Place your stop where your trade idea is proven wrong. Risk per share is the distance between your entry and that stop.
  3. Subtract estimated fees from the risk budget, then divide by risk per share. Round down, never up.
  4. Check against the capital you actually have. Divide the available capital (minus fees) by the entry price. Round down.
  5. Use the smaller of the two results.

shares by risk = (risk budget − est. fees) ÷ risk per share
shares by capital = (available capital − est. fees) ÷ entry price
size = the smaller of the two, rounded down

Fictional example

All numbers below are made up for illustration. They are not a recommendation, not a prediction, and not based on any real trade or security.

Fictional worked example (long trade)
Account equity$10,000.00
Risk per trade1%
Risk budget$100.00
Entry$50.00
Stop$48.00
Risk per share (entry − stop)$2.00
Estimated round-trip fees$4.00
Shares by risk: (100 − 4) ÷ 2 = 4848 shares
Available capital$2,000.00
Shares by capital: (2,000 − 4) ÷ 50 = 39.92, rounded down39 shares
Final size (the smaller result)39 shares
Position value (39 × $50)$1,950.00
Planned stop loss (39 × $2 + $4 fees)$82.00

In this example the risk limit alone would allow 48 shares, but the capital available only covers 39, so 39 is the size. The planned loss if the stop is hit is $82, which is inside the $100 budget.

Important limits

  • A stop is a plan, not a guarantee. Slippage and price gaps can make the actual loss larger than the planned loss.
  • Fees, available capital and rounding down can all reduce the share count.
  • This calculation sizes a position. It does not tell you whether a trade is a good idea.
  • How much to risk per trade is a personal decision that depends on your circumstances. Consider speaking with a qualified professional.

Related: Process vs. outcome ¡ Why journal your trades

Educational purposes only. Not financial advice. Trading involves risk, including loss of capital. See the risk disclosure.