How to Calculate Position Size
12 min read Β· Trading Basics
What is position size?
Position size is the number of coins, shares, or contracts you buy in a single trade. Correct calculation defines your intended risk β so that if your stop-loss fills at the expected price, your loss stays close to what you planned. Note: slippage, gaps, and low liquidity can cause the actual loss to differ.
The Formula
Where Risk ($) is the maximum loss amount you are willing to accept. Typically this is 1β2% of your account balance.
Why position sizing matters more than entry timing
Most retail traders focus on finding the "perfect" entry β but research consistently shows that a mediocre strategy with disciplined position sizing outperforms a great strategy with bad sizing. The math is simple: with a 50% win rate and 1:1 risk-reward, risking 1% per trade gives you a 99.9% chance of surviving a 10-trade losing streak with your account intact (down 10%). Risking 10% per trade? One bad week and half your account is gone, and you need a 100% gain to recover.
Crypto Example
Balance: $10,000. Risk: 1% = $100. BTC entry: $65,000. Stop-loss: $63,500.
If price drops to $63,500 and your stop-loss fills at that level, the loss is approximately $100 (1% of balance). In practice, slippage or a price gap may cause a slightly different fill. If it rises to $68,000 (R:R 1:2) β you make approximately $200.
Stock Example
Balance: $5,000. Risk: $50 (1%). AAPL price: $185. Stop-loss: $181.
Detailed example: sizing from scratch
You want to long ETH. You have $20,000 in your account. Your rule: risk 1% per trade. Step 1 β determine dollar risk: $20,000 Γ 1% = $200. Step 2 β find entry and stop using technical analysis. You see ETH at $3,200 with support at $3,120; you enter at $3,200 and stop at $3,110 (just below support). Step 3 β calculate distance: $3,200 β $3,110 = $90 per coin. Step 4 β calculate size: $200 Γ· $90 = 2.222 ETH. Step 5 β notional: 2.222 Γ $3,200 = $7,111. Step 6 β if using 5Γ leverage, margin required: $7,111 Γ· 5 = $1,422. Your account can afford this. If the trade hits the stop: 2.222 Γ $90 = $200 loss, as planned. If it hits a 2:1 target at $3,380: 2.222 Γ $180 = $400 profit.
Fixed-dollar vs percentage risk
Two main approaches to sizing: (1) Fixed-dollar risk β same $ amount on every trade regardless of account size. Easier mentally, but becomes too aggressive as the account shrinks and too conservative as it grows. (2) Percentage risk β a fixed % of current balance. Self-corrects: losses shrink future positions, wins grow them. Almost all professional traders use percentage risk. The calculator supports both β use the toggle to switch between "$ risk" and "% risk" input modes.
Accounting for fees and slippage
Exchange fees and slippage eat into your planned risk. Example: you want to risk $100 on BTC, the calculator shows 0.0667 BTC. On futures with a typical taker fee of 0.05β0.1% per side, fees on a $4,334 notional position can run $4β9 β 4β9% of your risk amount. The calculator has a "fee adjustment" option: enable it and enter the rate your exchange charges β the tool slightly reduces position size so your net risk (after fees) matches your plan. For stocks, use the per-share commission mode β if your broker charges a fixed amount per share (typically around $0.005 per share with a $1 minimum per order), enable this mode and enter your broker's rate.
Leverage does not change your risk
A common mistake: thinking 10Γ leverage means 10Γ the risk. It does not. Leverage only changes how much margin (collateral) is locked up and where the liquidation price sits. Your dollar risk is determined by two things alone: stop-loss distance, and position size. If you size a position to risk $100 with a stop 2% away, it does not matter whether you used 1Γ or 20Γ leverage β when the stop hits, you lose $100. Leverage becomes dangerous only when traders skip sizing and just put in "max leverage" β then stop-loss distance becomes larger than liquidation distance, and you get wiped out instead.
Rounding and minimum position sizes
Crypto: most exchanges allow fractions down to 6β8 decimal places. Binance has a "tick size" per pair β for BTC/USDT, minimum increment is 0.00001 BTC. The calculator output is usable as-is; just truncate to the exchange's precision. Stocks: most exchanges require whole shares. If the calculator returns 12.5 shares, round down to 12 β this reduces your actual risk slightly. Rounding up (to 13) increases risk above plan, which defeats the purpose. A few US brokers (Fidelity, Robinhood) offer fractional shares; there you can use the exact number.
Position size reference table
The table below shows how many shares or coins you should buy based on your account size, risk percentage, and stop-loss distance. Use it as a quick cross-check after running the calculator.
Example: $10,000 account, 1% risk ($100). Stop-loss distance vs position size in USD:
| SL distance | Position size (USD) | BTC qty (@$65k) | ETH qty (@$3k) |
|---|---|---|---|
| 0.5% ($325) | $20,000 | 0.3077 | 6.67 |
| 1% ($650) | $10,000 | 0.1538 | 3.33 |
| 1.5% ($975) | $6,667 | 0.1026 | 2.22 |
| 2% ($1,300) | $5,000 | 0.0769 | 1.67 |
| 3% ($1,950) | $3,333 | 0.0513 | 1.11 |
| 5% ($3,250) | $2,000 | 0.0308 | 0.67 |
Common Mistakes
- Using a fixed lot size instead of calculating from risk
- Ignoring exchange fees in the calculation
- Using a too-tight stop-loss to increase position size
- Risking more than 2% per trade even on "high-confidence" setups
- Adjusting position size by intuition after a losing streak ("I'll double down to make it back")
- Using percentage of price for stop-loss instead of the technical structure (arbitrary stops)
- Forgetting to recalculate position size when the account balance changes significantly
- Running the same risk % on highly correlated trades (e.g., three long crypto positions = one bigger position)
Frequently asked questions
What is the correct position size formula?
Position size = Risk amount ($) Γ· (Entry price β Stop-loss price). Risk amount is typically 1β2% of your account balance. This defines your intended risk per trade β actual loss may differ due to slippage, gaps, or partial fills.
How do I calculate position size for crypto?
Use the same formula: divide your dollar risk by the distance between your entry price and stop-loss. For BTC at $65,000 with a stop at $63,500 and a $100 risk budget: $100 Γ· $1,500 = 0.0667 BTC. Use our calculator to compute this instantly.
What percentage of my account should I risk per trade?
Professional traders typically risk 0.5β2% per trade. Beginners should start at 0.5β1%. Risking more than 2% dramatically increases the chance of a catastrophic drawdown β ten consecutive losses at 10% risk wipes out 65% of your account.
Does leverage change my position size calculation?
No. Leverage changes how much margin you need to hold the position, but your dollar risk is still determined by your entry price, stop-loss, and risk budget. The formula stays the same. Higher leverage simply means your liquidation price is closer to entry.
What is the difference between fixed-dollar and percentage risk sizing?
Fixed-dollar sizing means you risk the same dollar amount every trade (e.g., always $100). Percentage sizing means you risk the same percentage of your current balance. Percentage sizing is mathematically superior β it scales down automatically during losing streaks and scales up as your account grows.
How do fees affect position size?
Exchange fees reduce your effective profit and increase your effective loss. If you plan to risk $100 but pay $6 in fees (entry + exit), your real risk is $106. For precise sizing, subtract estimated fees from your risk budget before calculating quantity.
How often should I recalculate my position size?
Recalculate for every trade. Your account balance changes after each trade, so a fixed quantity will gradually oversize or undersize your risk. The calculator does this in seconds β there is no reason to use a rough estimate.