Position size
Position size decides how many shares or contracts you buy. A common approach is to derive it from risk: how much of the account may be lost if the stop is hit?
The 1 % rule, step by step
Shares = (account × risk per trade) ÷ (entry − stop)
Example: account $20,000, risk 1 % = $200 per trade. Entry $50, stop $47.60, so $2.40 risk per share. $200 ÷ $2.40 ≈ 83 shares, a position of about $4,150.
| Risk per trade | $ at risk | Shares |
|---|---|---|
| 0.5 % | $100 | 41 |
| 1 % | $200 | 83 |
| 2 % | $400 | 166 |
Why sizing matters more than entries
With 1 % risk per trade, ten losses in a row cost about 10 % of the account. With 10 % per trade, the same streak is close to ruin. Sizing from the stop distance also means a wider stop automatically leads to a smaller position, so the risk stays the same.
For options the premium is often the risk: a long call can lose 100 % of what you paid, so many traders size options by the premium they are willing to lose.
Frequently asked questions
How much should I risk per trade?
Common ranges are 0.5 to 2 % of the account per trade. The right number depends on experience, strategy and how many positions you hold at the same time.
Does a gap break the 1 % rule?
It can. If a stock gaps below the stop, the loss is larger than planned, see price gap. That is one reason to size smaller before earnings.
See it in the screener
The live demo shows every term with example data, right next to the score and its reasons.