In short: Game 1: learn how the Position Size game teaches you to size a trade so a loss stays at your limit.
In this game you get an account size, a risk limit, an entry and a stop. You pick the number of shares that keeps your loss at the limit. Each round uses new numbers.
The goal is to build the habit of sizing from your loss, not from how confident you feel.
Read the position sizing guide
Keep learning about game 1
Reading is a start, practice makes it stick. Run the numbers in our investor tools, test yourself in Stock Jeopardy, or follow the start here guides to see what to read next after game 1.
Further reading: Investor.gov from the U.S. SEC and the Canadian Securities Administrators investor education site offer free, independent guides for new investors.
The one line that does all the work
Position sizing comes down to one idea: decide the loss you can accept first, then let that choose the number of shares. The formula is short. Dollars at risk, divided by the distance between your entry price and your stop price, equals shares.
A worked example with new numbers
Say the account is $25,000 and the risk limit is 1%. That is $250. The entry is $50 and the stop is $46, so each share risks $4. Divide $250 by $4 and you get 62.5. Round down to 62 shares. Rounding down keeps you at or below your limit. If the stop is hit, the loss is about $248.
The position costs 62 times $50, or $3,100. That is about 12% of the account. So the plan risks 1% of the account while putting about 12% of it into one stock. These are two different numbers, and the game helps you keep them apart.
When a tight stop gives a surprising answer
Now try a stop only $0.50 below the entry. The math says $250 divided by $0.50 is 500 shares. At $50 each, that is $25,000, the entire account. The formula is correct, but the result is not wise. A stop that close can be hit by ordinary price wiggles. And putting everything in one stock means a single bad surprise can do real damage.
Many people add a second rule: no single position above a set share of the account. You can explore different splits with the portfolio allocation calculator.
Where the plan can break
- Gaps. If bad news hits overnight, the price can open below your stop. Your loss can then be bigger than planned.
- Fees and slippage. Real fills are not always at the price you expect.
- Stops placed by feel. A stop should come from the setup, not from the number of shares you wish to buy.
- Moving the stop farther away after the price drops. That breaks the whole idea.
How to get better at it
Treat each round of the game as a drill. Before you answer, say the three steps out loud: dollars at risk, risk per share, shares. Then check whether the total cost makes sense for the account. After ten rounds, the steps will feel natural.
The habit matters more than the exact percent. Whether someone uses 0.5%, 1% or 2% is a personal choice that depends on their situation, and nothing here says what you should use. What counts is that the loss is chosen before the trade, when you are calm, not after, when you are not.
To see what a finished trade might look like in dollars and percent, use the stock profit and loss calculator. For unfamiliar terms like stop price or slippage, check the glossary.
The game uses made up numbers and is for education only. It is not advice to buy or sell anything.
Position size is a tool for staying in the game
Most beginners think the main goal is to pick winners. A lot of experienced people would say the first goal is to avoid big losses. Suppose you risk 1% per trade and have five losses in a row. You are down about 5%, which is uncomfortable but recoverable. If you risk 10% per trade, five losses in a row take away about 41% of the account, because each loss is taken from a smaller base. Small risk per idea keeps you able to keep learning.
What to notice as you play
Watch how the share count changes as you go through the rounds. A larger account with the same percent risk means more shares. A bigger gap between entry and stop means fewer. If you can predict the direction of the answer before you do the math, you understand the relationship. Try to guess first, then compute. Over a few sessions, check how often your guess was right, and slow down on the rounds where it was not.
Questions people ask about position size
What does position size mean?
It is the number of shares you hold in one stock. A smaller position means a bad outcome costs you less. A larger position means a bigger gain or loss from the same price move. The game asks you to size a position before anything else.
Why set a risk limit first?
A limit decides, ahead of time, the most you accept losing on one idea. Deciding in advance is calmer than deciding after a loss has started. Many learners pick a small share of their account, such as one percent, as a practice number.
Does a stop price guarantee my loss stays small?
No. Prices can jump past a stop price, especially after news or overnight. The real loss can then be larger than planned. A stop price is a plan, not a promise, so a cautious limit gives more room for surprises.
Is there one correct risk percentage?
No. The right number depends on your goals, your account and how much loss you can handle. Practice numbers in the game are for learning only. Try different limits and see how the share count changes.
Quick recap
Position size links your risk limit to a number of shares. Decide the limit first, then work out the shares. Prices can gap, so real losses may exceed plans. The game is practice for learning the method, not a recommendation of any trade.
Education only, not investment advice. Numbers in examples are made up.
