What is position sizing in stock trading?

Position sizing determines how many shares of a stock or ETF you should buy based on your account size, risk tolerance, and stop loss distance. It ensures you never risk more than a predetermined percentage of your account on any single trade.

What is the 2% rule in trading?

The 2% rule suggests never risking more than 2% of your trading account on a single trade. For a $10,000 account, this means your maximum loss per trade should be $200.

How do I calculate position size for stocks?

Position Size (shares) = Risk Amount / Risk Per Share. Risk Amount = Account Balance x Risk %. Risk Per Share = |Entry Price - Stop Loss|. For example, with a $10,000 account, 2% risk, $150 entry and $145 stop: $200 / $5 = 40 shares.

Why is position sizing important for stock traders?

Position sizing is the most important element of risk management. It ensures no single losing trade can significantly damage your account. Professional traders typically risk 0.5-2% per trade to survive losing streaks and preserve capital.

free tool

Position Size Calculator

Calculate the optimal number of shares to buy based on your account size and risk tolerance.

Enter your account balance, risk percentage, entry price, and stop loss to get the recommended position size instantly.

Quick Select (Optional)

Account Balance

Risk Per Trade

= $100.00

Entry Price & Stop Loss

Entry Price

Stop Loss Price

This calculator provides estimates for educational purposes only. Always verify position sizes with your broker before placing trades. Not investment advice.

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