Position Size Calculator | Risk Per Trade Explained
💡 Key Tips
- The stop-loss decides the quantity, not the other way round. Place the stop where the trade idea is proven wrong, then let this tool tell you how many shares that allows.
- 1% per trade is the conventional ceiling for active traders. At 1%, a run of ten straight losses costs about 10% of capital — survivable. At 5%, the same run is close to fatal.
- A tight stop lets you take a larger quantity for the same rupee risk. That is why entry timing matters more than conviction.
- Skip any setup with a risk-reward below 1:2. Even a 40% win rate is profitable at 1:2, while a 60% win rate loses money at 1:0.5.
- Cap single-position exposure separately from risk. A very tight stop can mathematically justify putting 80% of capital into one stock — which is a gap risk you do not want.
⚠️ Things To Watch
- Stop-losses do not guarantee your exit price. Gap-downs, circuit filters and illiquid counters can fill you far below the stop, so real loss can exceed the calculated figure.
- Brokerage, STT, exchange fees, GST and stamp duty are not included here. On short-hold trades these can be a meaningful share of a small profit.
- If the position value exceeds your capital, you are being shown a leveraged position. Intraday margin makes it possible — it also multiplies the damage.
- Position sizing controls risk per trade, not portfolio risk. Five separate trades in the same sector at 1% each is really one 5% bet.
- This tool assumes a single entry and a single stop. Averaging down invalidates the entire calculation.
📋 Disclaimer
This calculator is provided for educational and informational purposes only. It does not constitute financial, investment, or trading advice. Trading and investing carry substantial risk of loss and are not suitable for every investor. Past performance is not indicative of future results. Always consult a qualified financial advisor and conduct your own due diligence before making any trading or investment decisions.
📐 Position Sizing Formulas
1. The core position sizing formula
2. Risk-reward ratio
3. Position value and the allocation cap
4. Why 1% survives and 5% does not
Position sizing decides how many shares to trade based on your capital, your risk limit and where your stop-loss sits. This guide covers the formula, the drawdown arithmetic behind the 1% rule, and what the maths cannot protect you from. Educational only — trading carries substantial risk of loss.
The stop-loss decides the quantity
Most retail position sizing runs backwards. A trader decides how many shares to buy based on how confident they feel, then places a stop somewhere below. Position sizing inverts that. You place the stop where the trade idea is proven wrong, decide what percentage of capital you are willing to lose, and let the arithmetic tell you the quantity.
The consequence is that a tighter stop permits a larger quantity for the same rupee risk. That is why entry timing matters more than conviction — a better entry is not just a better price, it changes how much you are allowed to hold.
The position sizing formula
Three steps, in order.
1. Risk Amount = Capital × (Risk % ÷ 100)
2. Risk Per Share = the distance between entry and stop-loss
3. Quantity = Risk Amount ÷ Risk Per Share
Worked example. Capital of ₹10,00,000 with a 1% risk limit gives a risk amount of ₹10,000. An entry at ₹1,450 with a stop at ₹1,385 means ₹65 of risk per share. Dividing gives 153 shares.
Notice what that implies. The position is worth ₹2,21,850 — about 22% of capital — while only 1% of capital is actually at risk. Always round the quantity down, never up past the risk limit.
Why 1% survives and 5% does not
The case for small position risk is arithmetic, not caution. Capital remaining after a run of losses is the starting capital multiplied by (1 − risk%) raised to the number of losses.
| Risk per trade | After 10 straight losses | Gain needed to recover |
|---|---|---|
| 1% | 90.4% of capital | 10.6% |
| 2% | 81.7% of capital | 22.4% |
| 5% | 59.9% of capital | 67.0% |
| 10% | 34.9% of capital | 186.8% |
The asymmetry is the point. A 50% drawdown requires a 100% gain simply to return to break-even. Ten consecutive losses is uncomfortable but entirely normal over a trading career.
What the maths does not cover
A stop-loss does not guarantee your exit price. Gap-downs, circuit filters and illiquid counters can fill you well below the stop, so the real loss can exceed the calculated figure. This is also why a very tight stop should not be allowed to justify an enormous position — cap single-position exposure separately.
Brokerage, STT, exchange charges, GST and stamp duty are not part of the calculation. On short-hold trades these can consume a meaningful share of a small profit.
Position sizing also controls risk per trade, not portfolio risk. Five separate trades in the same sector at 1% each is really one 5% bet. And averaging down invalidates the entire calculation, because the original stop no longer reflects the position.
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Frequently asked questions
How much should I risk per trade?
One percent of trading capital is the conventional ceiling for active traders. At that level a run of ten consecutive losses costs about 10% of capital, which is recoverable. At 5% per trade the same losing run costs roughly 40% and requires a 67% gain to get back to even.
How do I calculate position size with a stop-loss?
Multiply your capital by your risk percentage to get the rupee amount you are willing to lose. Divide that by the distance between your entry price and your stop-loss price. The result is your share quantity, rounded down.
What is a good risk-reward ratio?
Many traders treat 1:2 as a minimum. The break-even win rate is 1 divided by (1 plus the ratio), so at 1:2 you only need to be right about 33% of the time to break even, while at 1:0.5 you would need to be right 67% of the time.
What happens if the stock gaps below my stop-loss?
You are filled at the next available price, which can be well below your stop. Gap-downs, circuit filters and low liquidity all cause this, which means the actual loss can exceed the calculated risk amount. It is the main reason to cap position size separately from the risk calculation.
Educational and informational content only. EquityTimer is not a SEBI-registered investment adviser and does not provide buy, sell or hold recommendations. Data may contain errors or delays; verify independently and consult a registered financial adviser before making any investment decision.