Free tools / Position Size Calculator
Position Size and Risk Calculator
Work out how many shares to buy so that, at your chosen stop loss, you lose no more than a set percentage of your capital.
The most common mistake in portfolio management is sizing positions by feel. The professional approach reverses the order: first you decide how much you are willing to lose on a single mistake, and only that determines the number of shares.
The calculator works out position size from three inputs: capital, acceptable risk per trade and the distance to the stop loss. It also shows what share of the portfolio such a position will take up, which can be surprising with tight stops.
The one percent rule and why it works
A popular rule says to risk no more than 1 to 2 percent of capital on a single trade. At that setting, even a run of ten losses in a row takes the portfolio down by low double digits rather than wiping you out of the market.
Risk is calculated as the difference between the entry price and the stop loss level, multiplied by the number of shares. Hence a simple conclusion: the tighter the stop, the more shares fit within the same risk, but the greater the chance that ordinary market noise knocks you out of the position.
Risk per trade is not the same as exposure
With a stop 5 percent away and risk of 1 percent of capital, the position will take up a full 20 percent of the portfolio. The risk amount itself is controlled, but portfolio concentration is not, which is why it is worth applying a second limit: the maximum weight of any single position.
Control correlation separately. Five positions from the same sector and the same risk factor behave in practice like one large position, even if each one on its own sits within the limit.
Frequently asked questions
What percentage of capital should you risk on a single trade?
The most commonly used range is 0.5 to 2 percent. Lower figures suit investors with a short horizon and a high trade count, higher ones suit those with infrequent, carefully considered positions. What matters is consistency, not the number itself.
What if I don't use stop losses?
In that case the role of the stop distance is played by a worst-case scenario, for example the assumption that a position could fall 30 percent before you consider the thesis broken. Enter that level instead of a stop, because without some assumption about the maximum loss there is no rational way to size a position.
Does the calculator account for leverage?
The result is given in shares and position value, so for leveraged instruments enter the price and stop of the underlying, then compare the resulting value against the required margin. Bear in mind that leverage increases risk faster than potential return.
Related calculators
Numbers are one thing, a thesis is another
Invesaro publishes investment theses with a hard publication date, an edge score and a basket return tracked against the market. Free and in public.
See our theses →