Jul 6, 2026 · Joey Bess, AAMS®
Position Sizing: The Formula Every Trader Should Memorize
Position sizing decides whether a losing streak ends you or teaches you. Here's the exact formula plus a free calculator.
Position Sizing: The Formula
Most traders blow up not because their edge is bad, but because their size is wrong. The formula is boringly simple:
Shares = (Account × Risk%) ÷ (Entry − Stop)
Worked example
- Account: $25,000
- Risk per trade: 1% = $250
- Entry: $50
- Stop: $48
- Per-share risk: $2
- Shares: 125
If the stop hits, you lose $250 — no more, no less. If your target is 2R ($54), you make $500.
Why 1% (or less)
At 1% risk per trade, a 10-loss streak costs you ~10% — recoverable. At 5% risk, that same streak costs 40% — practically unrecoverable. Small size is not weakness; it's what keeps you in the game long enough for the edge to show up.
Use the free calculator
We built a public position-size calculator you can use without signing up.