Position sizing decides how much you can lose on one trade. Start with your account size and the percent you will risk, such as 1 percent. Then enter your entry price and your stop price. The calculator returns the number of shares that keeps your loss at your limit.
Example
With a $10,000 account, 1 percent risk, an entry of $20 and a stop of $18, your risk is $100 and you lose $2 per share if stopped out. That allows 50 shares.
A smaller stop distance does not mean you should buy more without thinking. Check the total cost too.
Read: how many shares should you buy
Keep learning about position size calculator
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 position size calculator.
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 idea in plain words
When people decide how many shares to buy, they often think about how much money they want to spend. A position size calculator flips the question. It asks how much you are willing to lose if you are wrong, and then works out the share count from there.
A second worked example
The post shows a $10,000 account with 1% risk. Here is a different case. Say the account is $40,000 and you choose to risk 0.5%, which is $200. The entry is $75 and the stop is $70. The gap is $5 a share. Divide $200 by $5 and you get 40 shares.
The total cost is 40 times $75, or $3,000. That is 7.5% of the account. If the stop is hit, the loss is about $200, and you still hold $39,800 in value, before fees.
Now widen the stop to $65, a $10 gap. The same $200 risk gives only 20 shares. A wider stop means fewer shares. That is the trade off the calculator makes visible: more room for the price to move means a smaller position.
Where the stop should come from
The calculator trusts the stop price you enter. If that number is a guess, the answer is a guess too. A stop should reflect a level that, if reached, tells you the idea behind the purchase was wrong. Some people look at recent price lows. Others use how much the stock usually moves in a day or a week. There is no single right method, and none removes the risk of loss.
Be careful about working backward. Choosing a very tight stop just to buy more shares is a common error. The share count looks big, but the chance of a small, normal dip knocking you out goes up.
Limits of the math
- Gaps can skip your stop. If a stock opens far below, the loss may be larger than planned.
- Fees and spreads are not in the simple formula.
- The result may not be a whole number, so round down.
- Several positions at once add up. Five trades risking 1% each means 5% of the account is at stake together, especially if the stocks move alike.
Making it a habit
Before any practice trade, fill in four boxes on paper: account size, percent at risk, entry, stop. Do the math, then check it with the calculator. After doing this a dozen times, you will notice the pattern without the tool.
Then look at the bigger picture. How much of your account sits in one stock, and how much in one industry? The portfolio allocation calculator can help you see this. For the wider planning questions, read how to build a stock portfolio.
You can find the other tools on the calculators page. This post is education only, not advice to buy or sell anything, and all numbers are made up.
Percent risk is a personal setting
The 1% and 0.5% figures used in these examples are only illustrations. Some people choose less when they are new, and some accounts have rules from a broker or employer. What matters is picking a number before you are in a trade, writing it down, and not changing it in the middle of one because of fear or excitement.
A small account has a special problem. With a $2,000 account and 1% risk, you risk only $20. A $2 stop gap gives just 10 shares. Fees can be a big part of such a small trade. It is fine to find that the math says a trade is not worth it. That is a useful answer too.
Check the result against common sense
After you get a share count, ask whether it feels reasonable. Does the cost fit your cash? Would you be comfortable owning that much of one company? What happens if the stock falls through your stop? Calculators do exactly what they are told, so the person has to supply the judgment. Treat the output as one input in your plan, not as a command.
Questions people ask about position size calculators
What do I need to use a position size calculator?
You need your account size, the share of it you accept losing, your entry price and your exit price. The tool divides your dollar risk by the loss per share. The answer is the number of shares.
Why not just buy the same number of shares every time?
Different stocks move by different amounts. The same share count can mean a small loss in one stock and a large loss in another. Sizing by risk keeps each plan comparable.
What happens if the price gaps past my exit?
The loss can exceed your plan, because your order may fill at a worse price. Calculators assume an exit at the chosen price. Leaving extra room in your limit helps cover surprises.
Do commissions matter?
They can. Fees add to your cost and shift your real result. Include them when you can, especially with small accounts. The glossary explains related terms.
Quick recap
A position size calculator turns a risk limit into a share count. Set the limit, find the loss per share, then divide. Gaps and fees can change real results. It is a planning aid for learning, not advice.
Education only, not investment advice. Numbers in examples are made up.
